The United States economy has been bouncing back in a remarkable way after the recent recession. Despite the Federal Reserve’s efforts to slow growth without collapsing it, the condition of the economy has left experts wondering if inflation can cool off. The question for the Fed is, are they failing at their mission?
It’s no secret that the Fed has been struggling to hit its inflation target of 2%, aiming to strike a balance a balance between encouraging growth and preventing inflation from spiraling out of control. But with the economy rebounding, unemployment at all-time lows, and the stock market climbing to record heights, the delicate balancing act is becoming increasingly challenging.
The truth is, the Fed’s monetary policy has been viewed by some as a failure thus far. Its interest rate cuts and bond-buying programs may be considered overripe, with the consensus being that these tools are only keeping the economy from deflating on itself. However, at the same time, they have allowed asset prices to rise, benefiting investors and corporations while widening the wealth gap.
Some experts warn that the current fiscal policies laid out by the administration may lead to a sharp increase in inflation, leaving the Fed in a precarious position. The recent surge in wages and price growth, coupled with the scarcity of available workers, are surefire signs that inflation may be on the rise.
While the economy continues to show an incredible level of resiliency, the question remains; can a delicate balance be maintained for a long time? The answer isn’t clear, but what is clear is that the Fed is walking a tight rope that is becoming more difficult to navigate as time goes on.
