The Hunger Games: The Fed Version

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I am just a poor boy

Though my story's seldom told
I have squandered my resistance
For a pocket full of mumbles
Such are promises
All lies and jests
Still, a man hears what he wants to hear
And disregards the rest…

-Paul Simon, The Boxer, 1969

Let the wise hear and increase in learning,
And the one who understands obtain guidance…

He who answers a matter before he hears it,
This is folly and disgrace to him.

-King Solomon, Proverbs 1:5 and 18:13, circa 970-930 BC

The Federal Reserve is between the Rock of Gibraltar and the Rocky Mountains. The data they use to explain their policy choices is in apparent transition. A self-aware analyst, seeing the conflicting data, knows that the right policy choice will only be understood in hindsight.

Monetary policy decisions typically need 12 to 18 months to have an economic effect. That means they must forecast the unknowable at least a year ahead. That’s why rate cuts often happen only after it is clear the economy is already, using technical economic terms, in the toilet. In this case, the Fed let inflation get out of control in 2021 and only began tightening after, as we say in Texas, the horse was already out of the barn and in the north 40.