The Fed is still acting too slowly

( Following its December meeting recently, the Federal Reserve announced that it would be taking swift action to try to curb rising inflation in the country.

Jerome Powell, the chairman of the Fed, said the group would reduce its purchases of government bonds in a quicker fashion to respond to inflation, which keeps rising. In addition, the Fed has plans to increase the interest rate three separate times in 2022, as opposed to the two times it had previously said it was planning.

Powell explained that the Fed’s plan is to finish the process of “winding down” bond purchases in March of 2022. Then, it will start the process of increasing the interest rates, which have remained at historically low marks since the start of the pandemic.

There are some people, though, who believe that the Fed isn’t acting fast enough, and should be doing much more to curb inflation and help Americans.

One of those people is Tracy Miller, who penned an op-ed for The Hill recently in which she wrote:

“If the Fed were going to act aggressively, rather than buying fewer government bonds each month, it would stop buying them altogether. It would also increase the interest rate it pays on bank reserves without hesitation.”

Her justification for that statement is that when the Fed purchases government bonds, it will increase the supply of money, which then further increases prices.

For almost two years now, the Fed has been pushing low interest rates to encourage people and businesses to make investments and purchases. Yet, at the same time, banks pay next to no interest on the money people have in their savings accounts, simply because the Fed’s interest rate is so low.

Miller then paints a grim picture of the future of inflation when she writes:

“We should not expect to see inflation fall much from its November level of 5.5 percent. Although the Fed is forecasting only 2.6 percent in 2022, there is good reason to expect a much higher rate.

“Americans are still spending the stimulus payments they received during the last two years. Even if the policy changes bring inflation down in the second half of 2022, the rate for the calendar year is likely to be well above the Fed’s 2 percent average target.”

Miller speculated why Powell would delay the pullback of investment for at least the next few months. First, the chairman says he wants to help lower the unemployment rate further, as it currently stands at 4.2%.

The problem with this thinking, though, is there are so many unfilled jobs on the market right now that more spending from the federal government would probably have little to no effect on reducing unemployment.

According to data from the Census Bureau, millions of people haven’t returned to the workplace because they’re caring for their children, “suffering from COVID symptoms, caring for someone who is sick, or concerned about getting or spreading the virus.”

But, Powell and the Fed will move on, albeit at a slower pace than Miller believes they should be.