With the September Federal Open Market Committee meeting this week in the aftermath of the August Consumer Price Index data coming in hotter than expected last week, investors are now 100% certain of a 75-basis-point rate hike come Wednesday.
Risks for the Fed run both ways: It could tighten the economy into a deep recession, or it could prematurely pivot and let inflation run its own elevated course.
Dr. Thomas Hoenig, the longest-serving Federal Reserve Bank president in history, joins MI2 Partners’ Harry Melandri to unpack the factors the central bank faces as it considers the next steps in its policy program, including quantitative tightening.
Dr. Hoenig, who led the Kansas City Fed for 20 years, was vice-chair of the FDIC from 2012 to 2018 and is now a distinguished senior fellow at the Mercatus Center, compares present circumstances to the 1970s, identifying mistakes the Fed must avoid repeating this time around.
As Dr. Hoenig and Harry discuss, the institution’s long-term credibility is at stake. Recorded on September 14, 2022.
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TIMESTAMPS:
1 Persistently Higher Inflation Continues to Surprise 01:44
2 What Parallels Are There Between the 1970s and Now? 06:01
3 The Moral Hazard of QE and the Significant Fallout from QT 13:00
4 The Politicization of Policy: Is the Fed Being Set Up for Failure? 27:10
5 The Impact of QT on Emerging Markets 36:06
6 The Takeaways 39:03
#federalreserve #fed #monetarypolicy
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