Flying Blind

Flying Blind

Shan Ahmed Tani Fukui Drew T. Matus
MAY 16, 2024

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Economic Monthly Businesses Ride to the Rescue

The U.S. Federal Reserve (the Fed) has reduced the pace of quantitative tightening (QT), the European Central Bank (ECB), and potentially even the Bank of England (BoE), could begin cuts as soon as next month, and the dot plot shows the Federal Open Market Committee (FOMC) cutting rates later this year.

As policymakers consider pivots, it is important to remember that there are no precise rules about the natural rate or policy timing. Slowing the pace of QT is intended to allow the Fed to reach an unknown optimal level of tightening without economic disruption. At the same time, Fed economists have often been over-optimistic about the pace of policy changes and the ECB has stirred some concerns over imported inflation caused by an asynchronous monetary policy.