Federal Reserve policy makers don’t have an explicit target for US stocks or consumer borrowing costs, but they know something’s off when they see it, and there’s a chance that now is one of those times. The S&P 500 Index has rallied 17% from its June lows through Tuesday, and consumer credit is growing at one of the fastest paces ever — developments that seem antithetical to the Fed’s goal of curbing the worst inflation in 40 years.
The thing is, the problem isn’t uniform, and the Fed should avoid upsetting the whole apple cart. Instead of throwing out his interest rate road map, Fed Chair Jerome Powell is likely to try some deft jawboning when he speaks later this month in Jackson Hole. He just needs to convince markets that policy makers are committed to their fed funds projections and that they have no plans to cut rates in 2023.