Editorial Board
The Fed Should Stop Tying Its Hands on Interest Rates
You can have data dependence or firm forward guidance, but not both.
Shall we pivot?
Photographer: Al Drago/Bloomberg
So far, so good. The Federal Reserve’s efforts to engineer a soft landing for the economy are going well. Last week’s 50-basis-point cut in the central bank’s policy rate looked right, given recent signs of cooling in the labor market and the further gentle decline in inflation.
What matters now is that the Fed should stay open-minded about future policy. That’s a challenge, partly because of the way the Fed explains itself.