Lesson Learned: Central Bankers Can’t Manage Economies All by Themselves
The US needs a better balance of monetary and fiscal policy to avoid the dramatic swings we’ve seen in the past decade.
A matter of balance.
Photographer: Jim Watson/AFP
The past three years have shown us the downsides of depending too much on low interest rates, and how a better balance of fiscal and monetary policy can achieve a stronger economy.
In the 2010s, the main economic policy debate was about how to boost the labor market and return inflation to the Federal Reserve's 2% target while avoiding deflation. The Fed settled on a strategy of holding interest rates at 0%, reducing borrowing costs and boosting financial asset valuations throughout the economy. The hope was that this combination would lead to more hiring and investing by companies.