Fed is right to stay the course on interest rates
Last week, the
There have been those that, wedded to formulaic understandings about the economy, have insisted it's all but mechanically impossible for inflation to come down into acceptable ranges without seriously harming the economy. We've even heard that we need a recession, that a recession is the inevitable endpoint of a sadly necessary effort to wrangle inflation under control, and that the Fed should not have relented on its campaign to sharply raise rates.
These critics pointed to the 1970s and the reign of
We should all be mightily thankful that Powell and his Fed colleagues didn't listen to the naysayers, in part because of some powerful and clear-headed voices bucking the trend, including Chicago Fed President
None of that is to say that it's milk and honey for everyone out there; that we haven't had a recession doesn't mean that rising interest rates and inflation haven't both hurt households, and the majority of Americans are still living paycheck to paycheck. The job certainly isn't done, and a combination of factors including President
Is this graceful landing the product of the particular circumstances of the contemporary economic picture? Maybe, but what isn't? The point is that it worked, and what definitely won't help now is if the Fed busies itself fixing what ain't broke.
Though the interest rates were kept steady this time around, Powell has repeatedly insinuated that he envisions a potential additional hike in the near term. This doesn't sound like too big of a deal given that the Fed's earlier series of successive rate increases did not drive us into recession already; what's another few basis points?
Yet the primary distinction between a healthy economy and a recession isn't whether interest rates were hiked – pretty much everyone agreed they had to be hiked – but how aggressively and how quickly; the problem is that once a recession sparks, it's next to impossible to get it back under control before it inflicts massive damage, and why would we play with fire when things are fine now?
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