Jerome Powell is tightening the Fed’s trajectory – a bit.
Photo: Reuters
Unemployment statistics miss millions of Americans, while employers are desperately looking for jobs. But loose monetary policy cannot solve this imbalance.
DrThe US Federal Reserve is starting to exit its very loose monetary policy. It is now buying fewer bonds as part of its quantitative easing programme. It was easy for her because it lost its potency.
But she is afraid of raising the interest rate in exchange for higher inflation. Certainly: no one knows exactly how prices will develop. The Federal Reserve has slightly overestimated inflation for years, but this year it tends to underestimate it.
Federal Reserve Chairman Jerome Bowles declared that the rate increases were “temporary” more steady than expected. Powell is in trouble. He wanted to ignore inflation and focus on as many jobs as possible, seeing underemployment as a huge problem.
In fact, he’s probably right: Millions of Americans of working age are not included in the unemployment statistics. At the same time, employers are increasingly desperately looking for employees, and the number of vacancies reaches ten million. But loose monetary policy cannot resolve this stark disparity.
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