The Federal Reserve has painted itself into a corner with its fight against inflation, and some experts say it now has no coherent plan for how to get out of it.
Having kept interest rates near zero for more than a decade and expanded its balance sheet to $9 trillion to stimulate the economy, the Fed is now facing a banking system that has become so dependent on cheap money that its sudden withdrawal may be killing the patient.
Powell’s predecessor from 1951 to 1970, William McChesney Martin, famously said that the role of the Fed was “to take away the punch bowl just as the party gets going,” in other words, to cool the economy by raising rates before it begins to overheat. To follow that analogy, however, the current Fed Chair, Jerome Powell, is now attempting to kill the party well past the morning after….