The Fed Needs to Recognize the Recovery
Tapering asset purchases now would demonstrate confidence and flexibility.
Powell’s message is fixed but fuzzy.
Photographer: Graeme Jennings/Bloomberg
Presenting the Federal Reserve’s semiannual report to Congress, Chair Jerome Powell didn’t budge. The current surge in inflation is temporary, he said, and the central bank won’t rein in its hyper-accommodative monetary policy until the economy has made “substantial further progress.” Powell and his colleagues may prove to be right that higher inflation is just a blip — the course of the economy is very hard to predict right now. Yet, given those very uncertainties, the Fed’s message to financial markets has come to seem too rigid.
There are things both Powell and President Joe Biden could do to help put this right.