Despite Political Pressure, the Fed Should Hold Firm
The fight against inflation is going well, but isn’t yet won. Chairman Jerome Powell is right to stick to his guns.
Promises should mean something.
Photographer: Samuel Corum/Bloomberg
Two essential questions are facing the US economy right now: whether the Federal Reserve’s next change in its policy rate will be a cut or an increase, and whether the central bank’s inflation target of 2% needs to change. Give Fed Chairman Jerome Powell credit for being forthright in addressing each in a recent speech.
On the first question, he said it’s too soon to say, but left no doubt that further increases will follow if necessary. On the second, he said no: His commitment to the existing target, much in question among academic economists these days, was firm. He’s exactly right on both counts.