The Fed Has to Grapple With Mounting Uncertainty
Thanks to the pandemic, its job was already difficult. As risks keep building, things aren’t getting any easier.
All clear?
Photographer: Michael Nagle/Bloomberg
On Wednesday, the Federal Reserve told investors more or less what they’d expected to hear — that it will most likely start tapering its bond-buying program soon, “liftoff” on interest rates might (or might not) happen next year, the recent spike in inflation is still deemed transitory, and the medium-term forecast for employment is a jobless rate of well below 4%. As intended, financial markets were mostly unmoved.
Viewed as a central-case scenario, the Fed’s unchanged outlook is certainly defensible. Yet Fed-watchers would be foolish to get too complacent. The range of uncertainty around these projections and the policy choices that will affect them is only getting wider.