Are the central bankers at the Federal Reserve just winging it? It sure seems that way if you step back and take a long view of their decision-making.
Fed officials project this aura of authority. You might imagine them as hyper-intelligent experts in the field of economics and finance making carefully calculated monetary policy decisions based on a thorough understanding of all the dynamics in the economy. After all, they must have risen to these important positions at the Fed based on their economic acumen, right? Or maybe they are just politicians making stuff up as they go along.
The committee projected additional cuts in 2025, dropping rates to around 3 percent. Now, stop and think about this. Six weeks ago, the FOMC was convinced that three rate cuts were the appropriate trajectory of monetary policy. Six weeks later, we might need rate hikes. Did I mention this flip-flop happened in just six weeks? This doesn’t exactly inspire confidence that these people know what they’re doing, does it? Now, you might say, “Well, Mike, monetary policy is a complex business.
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