Not trustworthy. That’s the Fed.
After trying to convince the public not long ago that the inflation they were experiencing was “transitory” (giggle), the Fed discovered it wasn’t. Whoops. They realized throwing tons of money at a shortage of goods resulted in a jump in the cost of living. Who could possibly know? A grade of ‘F’ on that lesson plan.
So the Fed, after realizing that “transitory inflation” was a myth, flexed their muscles and quickly raised interest rates to quash inflation. They proclaimed they were tough. They yelled 2% inflation or bust. The lessons of the 70’s and the ghost of legendary Fed Chair Paul Volcker hung over the current Fed. The “We be Tough” t-shirts were handed out (uh, not really).
Sure enough, the tough talking interest rate raising Fed has inflation down to 3%. Progress. High fives all over. Now the calls for lowering interest rates are getting louder. AND LOUDER. It looks like the Fed has called time out and sent the punting team out on the field. I mean 3% is close enough, right? The Fed doesn’t need to be that tough, right? OK then.
If the Fed does indeed “punt, ” declare mission accomplished and begin lowering interest rates, then all their tough talk is baseless. Kicking inflation into submission isn’t for wimps. Certainly there would be pain in the economy, job losses, business failures and some hardships, but hard choices are required to tame inflation………and get the cost of living down. Looks like the Fed has bowed to political pressure(??) or wimped out. Like getting the ball down to the 20 yard line (3% inflation) and then punting. That last 20 yards is hard. Really hard.
Thinking ahead, what IF the “boy, am I tough!” Fed submits to the calls for lower interest rates? Take housing for example. Should mortgage rates drop, there most likely would be a rush to buy an already limited supply of homes. Home prices would soar pricing out even more people. Of course all the other daily living costs would rise as well. Why would the Fed chance that when they are on the right track (or somewhat) to get to their target of 2% inflation?
Wimp out and punt now? The Fed can’t be trusted to have done their homework and learned their lesson. Oh well.
