Ed Lotterman: New Fed policies contradict old doctrines | Ed Lotteman

Then the eminent economist, suddenly recovered, asks for newspapers and a computer, to keep abreast of events. A headline leads to the “FOMC statement” issued after the June 15-16 meeting. She reads it with more and more horror and disbelief.

Despite recent spikes in year-over-year consumer inflation figures and dramatic increases in lumber, steel and fuel prices, the Fed sees them as transitory. The central bank will continue to promote rising inflation and is committed to increasing the money supply by buying $ 120 billion in bonds per month until employment increases.

That’s more than the Fed had ever bought a year before his brain injury. It is explicitly based on the assumption that there is a trade-off between inflation and unemployment, the vile old “Phillips curve“, which had sparked so many nefarious policies in the past.

Additionally, other reports report that in a post-meeting press conference, Fed Chairman Jerome Powell raised the possibility of advancing an interest rate hike through 2023 rather than in 2024. Yet that ties the hands of the Fed for two years. Panicked, Vanwinkle asks the nurse, “What year did you say it was?” “Why, 2021,” he replies. A central bank chief actually promising no interest rate hike, no monetary tightening for another two years? What madness ! Is she out of a coma or is she in hell?

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