Greenspan’s Success Shows Powell How to Skip
Several Federal Reserve officials have mused about putting off an interest-rate increase at the June policy meeting. History shows that’s a smart move in a hazy economy.
Alan Greenspan can teach Jerome Powell a thing or two.
Photographer: Andrew Harrer/Bloomberg
Disagreement is mounting at the Federal Reserve over the path of monetary policy, and that stands to reason given uncertainty about the economy’s future. The lags in policy transmission suggest a weaker economy looms, yet inflation is still running at more than twice the Fed’s target and the labor market remains sturdy. At times like these, history shows that skipping an interest-rate increase at a meeting is a prudent option that policymakers can rally behind.
In recent years, Fed watchers have taken as a given that the central bank would move in steady and regular increments and that, once it stopped doing so, the next step would be a move in the opposite direction. But it hasn’t always worked that way; in fact, former Chair Alan Greenspan regularly skipped increases while managing monetary policy through the 1990s, when the “Maestro” famously engineered the only soft landing in recent Fed history.