Economic experts weigh in on what this moment might mean.
Is Jerome Powell the problem or the solution? Two guest essays in the Opinion section this week have differing points of view on the chair of the Federal Reserve, who has been presiding over a two-day meeting of the rate-setting Federal Open Market Committee that concludes this afternoon. The outcome is important because the more aggressively the Fed fights inflation by raising interest rates, the greater the chance it will bring on a recession. |
There's wide agreement that Powell's Fed kept monetary policy too easy for too long and is thus at least partly responsible for inflation hitting a 40-year high, with consumer prices rising 8.6 percent in the past year through May. The debate is over whether Powell is doing the right thing now. Consumer confidence is weak despite the strong job market, and on Monday the Standard & Poor's 500 stock index fell to more than 20 percent below its January peak, signaling a bear market. |
Steven Rattner, a Wall Street executive who was a counselor to the Treasury secretary in the Obama Administration, is among the ranks of people who haven't been happy with Powell's performance to date. He argues in his guest essay this week that today's inflation is partly bad luck but also partly "policy errors, for which the central bank bears significant responsibility, along with the Biden administration." |
Rattner argues that the Federal Open Market Committee should raise its target range for the federal funds rate — the short-term interest rate that it controls — by three-quarters of a percentage point. That would cool growth, relieving pressure on prices. |
Rattner is likely to get his wish. As of Tuesday afternoon, traders' bets implied a 96 percent probability of such an increase. |
In his own guest essay on Tuesday, the former Fed Chair Ben Bernanke goes easier on Powell while expressing less pessimism about the economic outlook and arguing that this isn't a replay of the high-inflation 1970s. While Rattner seems to say that a recession is close to inevitable — "a measure of economic pain is the price we must bear for a combination of bad policy and bad luck" — Bernanke accentuates the positive. Without getting specific about the likelihood of a recession, he writes that "by doing what is needed to get inflation under control" Fed policymakers "can help the economy and the job market avoid much more serious instability in the future." |
Bernanke writes that today's Fed is more independent of the White House than the Fed of a half-century ago and has developed plenty of credibility as an inflation fighter. |
I've covered the conflict over Fed policy in my newsletter, which is exclusively for Times subscribers (you can sign up here to get it), and I lean toward Bernanke on this one. In raising rates, the Fed should strive to avoid throwing people out of work needlessly. To paraphrase an antiwar expression that was popular in the 1960s and 1970s: Recession is not healthy for children and other living things. |
Here's what we're focusing on today: |
Forward this newsletter to friends to share ideas and perspectives that will help inform their lives. They can sign up here. Do you have feedback? Email us at opiniontoday@nytimes.com. |
Contact us if you have questions about your Times account, delivery problems or other issues, visit our Help Page or contact The Times. |
|
No comments:
Post a Comment