TALKING STOCK
RICARDO SMITH: US Fed now seems more afraid of inflation than markets
Central bank criticised for underreacting when inflation is ticking up and then overreacting once inflation is elevated
Historically, there has been a stark difference between the Reserve Bank monetary policy committee (MPC) and the US Federal Reserve’s approach to monetary policy and interest rate decision making.
The MPC has always stuck to its guns and taken a tougher road on interest rates in fulfilling their inflation targeting mandate. However, the US Fed has often been moved and swayed by market pricing, taken a path of lenience when it comes to monetary policy — being accommodative when they ought to be neutral and being neutral when they ought to be tightening. They have been critiqued for initially underreacting when inflation is ticking up and then overreacting once inflation is elevated. ..
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