Fed Raises Risk of Policy Mistake and Market Accidents
The central bank needs to pull back on quantitative easing before it’s too late.
Realized inflation is being accompanied by additional inflation in the pipeline.
Photographer: Justin Sullivan/Getty Images
Developments this week have illustrated why we should be more worried about the increasing probability that a monetary policy mistake risks derailing a potentially strong and transformational U.S. economic recovery — assuming, that is, that market accidents don’t happen first, the probability of which is also increasing.
The two big U.S. inflation measures — the consumer price index and the producer price index — again came in hotter than consensus expectations. Such inflation data overshoots have become common worldwide, reflecting the extent to which both economists and policy makers are still playing catch-up with events on the ground.