Why the Fed Shouldn’t Stop Worrying About Inflation
The biggest mistake the central bank could make would be to let investors think its attention is shifting elsewhere.
So far, so good.
Photographer: Win McNamee/Getty
At the recent central-bank symposium at Jackson Hole, Federal Reserve Chairman Jerome Powell delivered a widely expected message on interest rates: “The time has come for policy to adjust.” He all but confirmed that the Fed would cut rates by at least a quarter-point when its policymakers next meet in September.
A modest cut makes sense. Inflation remains a little above target but continues to subside — and thanks to a cooler labor market, a lower policy rate would suffice to maintain gentle downward pressure on prices. That said, one of the points Powell made in his address deserves emphasis. Over the coming months, the biggest mistake the central bank could make would be to let investors think its attention is shifting away from inflation.