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by Jerry O’Driscoll Fed Chairman Jerome Powell testified to the Senate Committee on Banking, Housing, and Urban Affairs. It was the semi-annual testimony mandated by the Humphrey–Hawkins Act. Powell's testimony was anodyne. He repeated and reiterated the Fed's planned policy moves with respect to interest rates, and added suitable caveats on economic growth, inflation, and … Continue reading Fed Policy

A commentary briefly discusses the role of the Federal Reserve System in the Great Recession. With its ultraloose monetary policy in the early 2000s, the Fed single-handedly created the refinancing boom and ushered in the housing bubble. The record-low interest rates not only fed the boom that had to go bust, but also favored that sector of the US economy that is predominantly financed with debt, i.e., the financial sector, at the expense of sectors that are more reliant on risk capital, such as manufacturing. Adapted from the source document.

When PIMCO founder William Gross coined the term the new normal, he both stated the obvious and offered a fresh insight. Most people understand in a visceral way that things have changed dramatically when it comes to jobs and economic opportunities since the financial crisis of 2008. Today, the US economy is like a cardiac patient on artificial life support. Flat employment, flat credit growth and falling inflation-adjusted incomes are the attributes of the new normal. The Fed cannot both pursue maximum employment and safeguard against inflation. Indeed, there is a growing doubt that the Fed can truly change the employment picture. But the political attraction of promising people higher wage and job growth, it seems, is so powerful that members of the Federal Open Market Committee and central bankers around the world cannot help themselves. Ultimately, using low interest rates in an attempt to boost demand and job creation will fail. Adapted from the source document.