Financial Times | Mon, Jun 14, 2021
by Mohamed El-Erian
The US Federal Reserve monetary policy meeting this week has turned from a snooze-fest into a test of the institution’s control of the narrative it sought to promote in markets: that the current spike in inflation is transitory.
How the Fed responds has implications not only for its policy credibility but also for President Joe Biden’s economic reforms and global financial stability.
Developments on the ground have pinned the Fed into a corner of its own making as a stronger economy challenges the central bank’s commitment not to tighten policy until there is actual evidence, rather than forecasts, that employment and inflation are at target levels — its so-called outcomes-based policy framework.