SECOND TAKE
BLOOMBERG OPINION: Fed’s ‘nothing to see here’ messaging must change
Officials are refusing to shed light on plans to tackle inflation
27 May 2021 - 11:49
The US Federal Reserve had little choice in 2020 but to promise pedal-to-the-metal monetary accommodation for the foreseeable future. This unequivocal commitment was the only instrument it had left to provide what was then a necessary stimulus. Now the Fed needs to start walking this promise back.
Today’s monetary policy settings aren’t necessarily wrong. Interest rates close to zero and hefty monthly bond purchases might very well be the correct posture for the Fed right now. Yet new economic data has underlined the risks in the outlook. The Fed needs to show it’s watching these uncertainties with an open mind, rather than telling markets as it has of late: “Nothing to see here, move along.”..
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