Will ‘Too Late’ Powell Become ‘Not Enough’ Powell?

After being too late to raise interest rates in 2021–2022, Powell may now cut rates by 25 basis points, which is not nearly enough.

Fed Chair Jerome Powell has developed an unfortunate reputation for being chronically late with his appropriate policy decisions. His most significant misstep came when he maintained near-zero interest rates from January 2021 to June 2022, all while inflation spiraled out of control.

As the Federal Reserve prepares to meet this week with the intention of cutting interest rates, the question arises: Will the Fed’s cut be sufficient?

The Fed’s mandate is to ensure price stability while promoting full employment. However, the actions necessary to achieve these objectives stand in stark contradiction. To curb inflation, the Fed must implement a restrictive monetary policy, which includes raising interest rates and slowing the growth of the money supply.

Conversely, when the economy struggles to generate enough jobs for new labor market entrants, the Fed opts for a more stimulative approach, which involves lowering interest rates and increasing the money supply.

Since June 2022, the Fed has focused heavily on stabilizing prices. This strategy was needed largely because of the federal government’s massive multi-trillion-dollar annual…