The U.S. Fed’s Gamble on Higher Inflation

MIN READApr 12, 2021 | 18:02 GMT

The U.S. Federal Reserve building is seen on July 1, 2020, in Washington D.C.

(DANIEL SLIM/AFP via Getty Images)

By saying it will tolerate higher inflation for longer and not move preemptively against potential reignited inflation, the U.S. Federal Reserve is conducting a monetary policy experiment with long-term risks to interest rates, exchange rates, wages, investment, financial stability and, ultimately, economic growth. There is no alternative to the current easy monetary policy, given the continued disruptions in the U.S. economy. And, while rekindled inflation is not an immediate threat, political pressures to maintain exceptional monetary support and a broadening central bank mandate, along with large fiscal stimulus, could create a situation that leaves the Fed with too few options, too late. ...

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