'By not remembering its 2021 monetary policy mistakes that led to multi-decade high inflation, the Fed now risks causing an unnecessary economic recession by making the same monetary policy mistake that it made before but in reverse,' Lachman writes.
Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a Senate Banking Committee hearing in Washington, D.C., U.S., on Thursday, July 11, 2019.udi Dornbusch, the late MIT economist, said of the Mexican central bank that he could understand that it made mistakes. After all, its board members were human. However, what he could not understand was how the same people could make the same mistakes time after time.
In 2021, at a time when the economy was receiving its largest budget stimulus on record and recovering well from its 2020 Covid-induced economic recession, the Fed kept monetary policy too loose for too long. Not only did it keep interest rates at their zero-lower bound; The Fed also flooded the market with liquidity by buying $120 billion a month in Treasury bonds and mortgage-backed securities. It did so even at a time when both the equity and housing markets were on fire.
Fast forward to today, we find that once again the Fed seems to keep forgetting that monetary policy operates with long lags. This is inducing the Fed to once again follow a data dependent policy. This time around, the Fed is saying that it will not stop raising interest rates or slow the pace of its quantitative tightening until it sees the clearest of signs that inflation is coming down to its 2% inflation target.
Singapore Latest News, Singapore Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Doubling down? Strategist who revels in challenging the consensus sticks by her call for 8% fed-funds rateDominique Dwor-Frecaut, a former associate with the New York Fed, says the Fed needs to hike the fed-funds rate to 8% to stabilize inflation.
Read more »
Asian shares stutter, dollar rally pauses as Fed cues eyedAsian stocks edged lower on Tuesday as the prospect of the U.S. central bank having to stay on its hawkish path weighed on sentiment, with investors looking to the minutes of the latest Federal Reserve meeting for further monetary policy clues.
Read more »
Market Now Sees Fed Going Higher as Inflation Proves Tougher To TameFollowing a week of data showing unexpectedly resurgent inflation, fed funds futures contracts now indicate the Federal Reserve will hike its target rate up by half a percentage point in the coming months. | Economy
Read more »
Dollar rally loses steam as traders wait on Fed, dataThe dollar was parked below recent peaks on Tuesday, as a three-week rally faded and traders waited on economic data to figure on whether it's warranted to push the dollar up any further.
Read more »
Brent oil lower amid stronger dollar, caution ahead of Fed minutesThe Brent crude benchmark opened slightly lower on Tuesday as the U.S. dollar strengthened and traders waited for cues from the U.S. Federal Reserve meeting minutes, after optimism over demand amid tightening supplies drove prices higher on Monday.
Read more »
Indian shares set for muted start amid caution ahead of Fed minutesIndian shares are set for a muted start on Tuesday as investors await the U.S. Federal Reserve's latest monetary policy meeting minutes to gauge the central bank's future rate-hiking path.
Read more »