The Federal Reserve Brings the Pain

For the first time since the introduction of covid vaccines, America's central bankers believe that a price must be paid to bring inflation back under control.

What a difference three months makes.

As recently as March 2022, Federal Reserve officials were still optimistic that Americans wouldn’t need to endure slower growth or higher unemployment to get inflation back on track. Prices were expected to normalize more or less on their own after a few years—even with Russia’s invasion of Ukraine and China’s ongoing social experiment with “Covid Zero”.

Things have changed. The latest economic projections of major economic variables “under appropriate monetary policy” imply that Fed officials now believe that they must force inflation back into line at the cost of lower output and higher joblessness.

Yet the central bankers seem ambivalent about what they are planning to do. Fed boss Jerome Powell tried his best to synthesize the diverse and contradictory views of his 17 colleagues at the press conference following Wednesday’s meeting of the Federal Open Market Committee, but the result was confusing and often incoherent.