November 23, 2021

Under Jerome Powell, the fed initiated new operating procedures. It let the inflation rate to “temporarily” diverge from the 2%. The fed never specified how long and or what type of deviation it would be willing to tolerate. So far, the US experience with the new procedures has not been all that great. The US inflation rate has reached the highest level in three decades. The Fed faces an interesting dilemma, how to finance the Federal government budget deficit while simultaneously reducing the inflation rate. Does Jerome Powell have the skills and knowledge to guide the US return to normalcy? If as we believe the economy begins to slowdown, the fed will have a tough time meeting the 2% target. A risk averse fed will be slow to return to normalcy.

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