What's a cut between friends?
On church building campaigns, extreme pandemic responses, and why it's tough to be the Federal Reserve chair right about now
Even without anyone prominently second-guessing him, Federal Reserve chair Jerome Powell has an unenviable job: In the midst of high uncertainty about everything from the Federal budget to trade and tax policy to geopolitical uncertainty, he's charged with figuring out how to gently maneuver the world's most important money supply through the twin goalposts of low inflation and high employment.
■ Because the Federal Reserve mainly depends upon managing interest rates as its tool for action, caution and predictability are the keys. The business sector likes certainty -- but so do families and individuals and all the other actors in the economy. If a church, for example, is fundraising to build a new sanctuary, its leaders will want to have a fairly good forecast of the available interest rates for when they borrow.
■ It does not make Powell's difficult job any easier when he is second-guessed from the bully pulpit and heckled for not cutting interest rates by 2.5 percentage points. Every rate change comes with unanticipated and second-order consequences, but a change of 2.5% (ten times the size of a more conventional quarter-point move) would not only forcibly reorder much of the investing universe, it would also introduce lasting and punitive uncertainty into perceptions of the economy overall.
■ The outbreak of the first serious pandemic in a century was cause for swift and dramatic rate-cutting -- it was the boldness of the reaction in a moment of extraordinary crisis that gave confidence to a panicky world. Today's circumstances are in many ways the opposite: Government policies are creating much of the meaningful uncertainty, and if the Federal Reserve were to start counter-programming against government policies, the result would be chaos, topped with a heavy layer of angry polemic against unelected Federal Reserve bankers. For now, slow and steady is the only way.
