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The Fed can't save the economy
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The Fed can't save the economy

A slowing pace of rate hikes is appropriate, but we need supply-driven growth

Matthew Yglesias
Dec 19, 2022
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The Fed can't save the economy
www.slowboring.com

The Federal Reserve raised interest rates last week by 0.5 percentage points, a rapid shift compared to the Fed’s traditional 0.25 percentage point increments but a slowdown from the .75 percentage point increases following the past few meetings.

This seems like an appropriate decision, but I think going forward the Fed should probably slow back down to the normal quarter-point pace. We’ve had a couple months of good CPI data, the energy situation seems to have calmed down, and there’s reason to think that housing inflation has actually peaked. So while it would be inappropriate for the Fed to declare victory on inflation, it is time to start taking a more measured approach and see how the data evolves.

But whatever the Fed does (and a lot of people with more degrees and more detailed monetary policy knowledge are having a lot of arguments about what exactly that should be), I think the more important point is that the details of Fed policy won’t be the decisive factor in American pro…

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