Ghosts of Inflation Past Haunt Fed’s Pivot Party
There’s plenty of history to learn from as the Fed takes a step toward early rate cuts. Which may be why some officials are taking a half-step back.
Hello Jerome, my old friend.
Illustration: Edwin Austin Abbey/Bettmann/Getty
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It would be good to move on from last week’s pivot toward lower rates by the Federal Reserve, but unfortunately, it would also be too soon. What exactly the Federal Open Market Committee meant by its pronouncedly more dovish approach is still open for interpretation. It’s still possible for Fed officials to adjust. And other central banks now have to make their own adjustments. The Bank of Japan relieved many in the markets by leaving its negative interest rate unchanged Tuesday and giving little guidance for the future. That removed the last risk that something might upset the path toward lower interest rates in what remains in 2023. Yet the turn made by Fed Chair Jerome Powell in his messaging continues to make waves.