What drove the Fed to change their tune? In the most recent testimony in front of a congressional committee, chair Powell spoke about getting closer to their stated 2% target. But clearly the numbers are still elevated. The restrictive monetary policy is serving to bring demand and supply into better balance and to put downward pressure on inflation.
He said that moving too soon or too much could stall or even reverse the progress we have seen against inflation.
In spite of this, Chair Powell said that there is a risk of reducing policy restrain too late or too little could unduly weaken economic activity and employment. For now they’re going to continue to monitor the data on a meeting by meeting basis and make decisions on a meeting by meeting basis.
So why did the Fed change their stance? This is a very different posture from what we have heard over the past two years.
This is one of those questions that seems to be eluding the mainstream media.
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