The US Federal Reserve’s series of suboptimal decisions in the last 12 months regarding inflation means that its next policy decision also is likely to be suboptimal. Rather than being able to deliver a smooth landing for the US economy, the Fed must now judge what constitutes the least harmful option.
CAMBRIDGE – A close friend who has been incredibly successful in his tech career once observed that an initial suboptimal decision is likely to lead to a series of subsequent bad decisions. Economists call this “multiple equilibria.” And the US Federal Reserve, the world’s most influential monetary institution, finds itself in the midst of such a situation regarding inflation – with implications that extend well beyond US economics and finance.
CAMBRIDGE – A close friend who has been incredibly successful in his tech career once observed that an initial suboptimal decision is likely to lead to a series of subsequent bad decisions. Economists call this “multiple equilibria.” And the US Federal Reserve, the world’s most influential monetary institution, finds itself in the midst of such a situation regarding inflation – with implications that extend well beyond US economics and finance.