Markets are pushing Fed into developing-economy territory

JUDGING from price movements on Monday (Mar 21), the Federal Reserve risks slipping further into a no-win interaction with markets more typical of developing countries that lack policy credibility than to a systemically important central bank - let alone the world's most powerful one. Absent a quick re-establishment of its inflation credential, something that the markets doubted again on Monday, the Fed would face even more of a no-win policy paradigm that would cause what, only a few months ago, was avoidable harm to livelihoods in the US and beyond.

This unfortunate sequence is painfully familiar to some developing countries:

* First, through a misdiagnosis of the economic situation or policy inertia or both, the central bank falls behind inflation realities and erodes its inflation-fighting credibility.