Can the Fed Overcome Its Transitory Policy Mistake?
The later the Fed is in reacting properly to inflationary developments, the greater the likelihood that – by having to hit the policy brakes hard – it will end up being the main cause of the transitory inflation pattern on which unfortunately it had bet part of its credibility.
But in being proved right in this way, the Fed would risk a damaging domestic recession, market volatility, and destabilizing spillovers for the global economy.
Mohamed A. El-Erian Project Syndicate 2 Decenber 2021
The longer central bank ‘tapering’ is delayed, the more the risk of a disruptive markets move
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