The Fed Is Hawkish Now? I’ll Believe It When I See It. By Ryan McMaken

Pouring a little less gas on a fire doesn’t make you a fireman. From Ryan McMaken at mises.org:

If you did any Fed watching this week, you probably heard all about how Jay Powell has turned (or perhaps returned) to hawkishness, and how the Federal Open Market Committee is all about fighting price inflation now.

A particularly cartoonish version of this claim was written by Rex Nutting at MarketWatch, who declared, “Everyone’s a hawk now. There are no doves at the Fed anymore.” He wrapped up with “This means that inflation no longer gets the benefit of the doubt. It’s been proven guilty, and even the doves will prosecute the war until victory is won. For the inflation doves at the Fed, Nov. 10, 2021, was bit of [sic] like Dec. 7, 1941: Time to go to war.”

This reads like a parody, so I’m still not 100 percent convinced this writer isn’t being sarcastic. But one will find no shortage of articles making similar claims throughout the financial media—albeit in a less over-the-top fashion.

We’re told about the “Jay Powell pivot” and how the Fed will even soon be “normalizing.” Let’s just say I’ll believe it when I see it. In fact, the evidence strongly suggests the Fed is still of the thinking that only a few tweaks will set everything right again. All that’s needed is a slight slowdown in quantitative easing (QE), and maybe an increase of fifty or a hundred basis points to the federal funds rate, and happy days are here again.

In other words, the Fed is still thinking the way it has thought for the entirety of the twelve years since 2009, when today’s QE experiment began. In that view of the world, it’s never the right time to end unconventional monetary policy. It’s never the right time to sell off assets. It’s never the right time to let interest rates increase by more than a percent or two. Meanwhile, the reality for ordinary people has been one of the weakest and slowest recoveries in history. But the Fed justifies it all to itself because Wall Street is happy.

That’s been the reality for more than a decade. And there are no signs that the Fed is “pivoting” away from that any time soon.

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