The author is the President of Queens’ College, Cambridge, and a consultant for Allianz and Gramercy
The suggestion that the US Federal Reserve should stop lagging behind in rising inflation is a polite way to explain what the world’s largest bank should do to its legislative committee. meeting this week.
In short, the Fed is expected to immediately suspend its stock program, inflation expectations three times and possibly interest rates rise this year and bring until March the announcement of plans to reduce its investment. He should also explain how he contributed to the decline in prices and why the delay was taken.
Without this, it will be difficult to restore order and restore its integrity.
Since the Federal Open Market Committee’s decision-making committee met last December 14-15, a list of consumer prices in the US. breaking 7 percent. Price growth has risen more than 5 percent and increased drivers. Unemployment fell 4 percent while workers’ participation did not change, just before the outbreak.
In addition, the Fed’s average inflation rate – the largest consumer index – of 2021 is 4.4 percent, more than double what it had predicted in the previous year, and the 2022 forecast rose 2.7 percent. Further repetition in 2022 is on the cards.
All of this data speaks directly to the Fed’s responsibility. They suggest that the monetary policy should no longer be practical. However it is still a promoter of uber, and is on its way to staying for a while.
Instead of hitting the brakes, the Fed still has its foot on the accelerator: real interest rates after considering the rise in prices are extremely difficult. When it is on its way stop its excess reduction The promotional program at the end of this quarter, continues to put money into the market and the recession.
Not surprisingly, the economy has been in turmoil throughout history despite significant changes in the rhetoric of analysts since the late Fed Chairman Jay Powell. “retired” “Temporary” of falling prices in late November.
The pressure to look forward to rising prices is growing not only because of rising prices for manufacturers but also because of low productivity, mass production and inflation by 10 percent in January.
Having a problem wrong inflation for many years 2021 and misses one step after another, the Fed’s delayed approach is at risk which Powell himself warned was “high risk” to the basic necessities of life. As a result, at their meeting this week, they need to send a clear message that they are interested in curbing rising prices.
This should be done by the immediate end of QE, the future trend in the three-fold increase in interest rates and shows that the risk-based approach is based on strong targets. The Fed is due to announce in March the announcement of its “quantitative tightening” plan.
In order to prove all of this, officials also need to confirm why they misinterpreted long-term inflation (as mentioned earlier, I believe this will go down in history as one of many. lower prices for central bank), and explain how they are now better at incorporating larger bottom-up indicators into its large drawings and predictions.
This is what I believe the Fed should do. I’m sorry it doesn’t, though.
Posted by happened three years ago while the market volatility forced it to turn around (that is, to return to a more tight monetary policy even if the economy did not allow it), the Fed may prefer a more gradual approach.
Indeed, there is a window on such a process to provide systematic change in policies that avoid the integration of long-term warming, declining economic growth and economic instability. But the window is too small and too dangerous.
Given the current state of affairs, public finance is one of the Federal slow-moving commodities that are forced by the end of this year to become part of the larger economy. The result would be a catastrophic loss of life, a severe financial crisis, a major threat to the recession and a serious threat to the global economy and the economy.
The Fed has a chance this week to make a real difference on the ground and reclaim what was lost. To achieve this, they must be courageous. Continuing on its modern path puts it at another risk, a very disturbing mistake later this year.
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