Economics
The Fed Is Flying Blind
The U.S. central bank isn’t sure why inflation is staying so low—but it’s raising rates anyway, risking a recession.
Janet Yellen, chair of the U.S. Federal Reserve.
Photographer: Andrew Harrer/BloombergThis article is for subscribers only.
The architects of U.S. monetary policy at the Federal Reserve should be happy. They’ve succeeded beyond their own expectations in bringing down the unemployment rate without triggering an outburst of inflation. Stock indexes are near record highs, and interest rates remain low.
But those who set interest rates are in the awkward position of not understanding how things got so good—and are therefore confused about what to do next. “The Fed isn’t run by computers, it’s run by people,” says David Rosenberg, chief strategist at Gluskin Sheff + Associates, an asset management company in Toronto. “Like all of us they have their flaws and their blind spots.”