The Fed is just as confused as the rest of us
The central bank is paralysed by a fog of policy uncertainty, but the data could well necessitate a quick response by autumn
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THE most powerful institution in global finance is as completely and utterly confused as the rest of us.
At its policy decision on Wednesday (Jun 18), the US Federal Reserve’s rate-setting committee held rates at 4.25 to 4.5 per cent, but chair Jerome Powell and his colleagues essentially acknowledged that they had no idea what would come next.
They couldn’t precisely project where US President Donald Trump’s tariff rates would end up, much less how they would impact consumer inflation and the labour market. Nor could they confidently handicap jarring changes to immigration and fiscal policies and the evolving war between Israel and Iran. The big risk, of course, is that the uncertainty and indecision will make the Fed late to arrest a potential increase in unemployment.
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