The United States Federal Reserve (Fed) is not in tune with the economic situation, warned Jason Furman, a Democratic economist and former president of the White House Council of Economic Advisers, calling for the central bank to take a turn. swift to a stricter policy.
“An overheated economy helps vulnerable workers the most,” Furman, now a Harvard University professor, wrote in a presentation prepared for the Peterson Institute for International Economics.
“But a recession hurts those vulnerable workers more … Lowering inflation a little now could help avoid even more severe and painful steps in the future,” he said.
Over the past 20 months, the Fed has targeted its monetary policy arsenal with a single goal: restoring employment, especially for low-income people whose conditions were hit the hardest during the pandemic.
Interest rates remain anchored in a range of 0 to 0.25% and the central bank’s debt purchase program (which consisted of the acquisition of assets for 120,000 million dollars a month in Treasury bonds and mortgage-backed securities) is still on the decline.
With high inflation and rapidly falling unemployment figures, there are already those who believe that the central bank could be doing more harm than good in its goal of reviving the labor market.
If in the future it has to catch up with a more drastic policy change and accelerated cycles of interest rate increases, it will hurt those whom it apparently intends to help, the specialist warned.
His call on the Fed to accelerate the end of bond purchases and establish a “default” rate hike plan in the first half of 2022 is the latest salvo in the current debate from economists, investors, officials and legislators. on the risks posed by inflation.
Some investors expect the Fed to raise rates perhaps three times next year. The Federal Reserve is divided on whether it will need to increase the price of credit in 2022.
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