Less is more when it comes to Federal Reserve policy

Caution is the best response to recent US economic data

Friday’s US employment report was generally strong, with job growth of 211,000, declining unemployment and a drop in the number of workers involuntarily confined to part-time work.

The data, along with indications that growth in the second quarter is likely to come in above 3 per cent, suggest the economy is reasonably robust. But these economic data present difficult issues of interpretation and policy choice for the US Federal Reserve. Is the economy or the stock market enjoying a “sugar high” or is the current path sustainable? What weight should the Fed give strong employment figures relative to gross domestic product growth that remains modest by historical standards and relative to low rates of inflation and expected inflation? How should the Fed treat the tension between the great uncertainty that so many economic actors experience and near-record low levels of market volatility and expected volatility…?

Source: Less is more when it comes to Federal Reserve policy


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