Did the Fed just make a huge mistake?

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The cost of living is Issue No. 1 for voters heading to the polls, but the Federal Reserve saw America’s persistent inflation problem Wednesday and opted not to do anything about it.

At least for the next six weeks, anyway.

Despite consumer prices gaining 3.7% over the past year and the Fed’s preferred inflation gauge stubbornly remaining 50% above the central bank’s target, the decision to hold interest rates steady was widely expected.

That’s because changing rates is a blunt instrument that can inflict serious damage on the economy when ill-timed or used improperly.

“Interest rates get in the cracks,” Fed Chairman Kevin Warsh said in a press briefing Wednesday. “They affect everything.”

Central bankers just last month hiked rates for the first time in more than three years, and they want to wait a bit to see how the economy responds before bashing it over the head again with another rate hike.

“Ensuring price stability and watching inflation is not about some fixed date on a calendar or some isolated data point,” Warsh said. “It’s about ensuring we have clear objectives and the right monetary policy.”

Warsh said he was encouraged by the reduction in inflation expectations since the Fed raised rates in September.

By waiting, however, the Fed is also taking a significant gamble. The Fed risks another 2021-like mistake, when it assumed the inflation monster staring the economy directly in the face could be defeated by just ignoring it. (The Fed was disastrously wrong).

This time may truly be different, and not acting with haste could prove prescient.

Or it could force the central bank to give the economy some December shock therapy that it may have been able to avoid with an October rate hike.

Jobs. Hiking rates increases businesses’ borrowing costs, which leaves them with less money to hire.

Now may be a perilous time to mess with the job market: The US economy added only 29,000 jobs in September, well below expectations. And the September report showed that the economy added 60,000 fewer jobs over the previous two months than previously believed.

The labor market is by no means in bad shape, but it has been on shaky ground. The US economy lost 10,000 jobs in July and in seven of the past 16 months. Although unemployment remains at a healthy 4.2%, economists describe the economy as “low hire, low fire.”

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In other words, your position may not be at risk, but if you leave your job, you may have trouble finding a new one.

Markets. Treasury yields moved higher since the last Fed rate hike, with bond yields at one point hitting multi-decade highs. Yields have slipped a bit since, returning to where they were in mid-September, but the still relatively high bond yields can help give the Fed cover, because they have an effect similar to the Fed funds rate, slowing the economy and inflation.

The Fed also doesn’t like to surprise investors – even in Warsh’s new keep-‘em-guessing era. The market had priced in a 91% chance that the Fed would hold rates, according to CME’s FedWatch tool, and a hike could have sent the markets into a painful rebalancing.

Timing. The Fed’s decision may also have been influenced, at least somewhat, by the upcoming election. Narayana Kocherlakota, the former Minneapolis Fed president, told my colleague Matt Egan that the Fed hesitated to raise rates Wednesday because it wanted insulation from President Donald Trump’s criticism. But the Fed throughout its history has changed rates many times just as voters were heading to the polls, my colleague Elisabeth Buchwald also noted .

The “transitory” error: The Fed typically doesn’t get involved when supply shocks like the Iran-war-induced energy crisis cause inflation. They’re notoriously temporary, hard to predict and insensitive to rate changes.

But supply shocks sometimes lead to bigger problems that the Fed can help fix. The Fed should know: It just went through this.

As the economy emerged from the pandemic, the Fed made a mistake with inflation, declaring it a result of a “transitory” supply shock related to the Russia-Ukraine war and massive supply chain snarls. It ended up becoming the most significant inflation problem in a generation. The Fed, caught off guard, was forced to raise rates at a historic pace – three consecutive hikes of three-quarters of a percentage point.

Ultimately, the Fed succeeded at lowering out-of-control inflation to more manageable levels, but not before consumer prices peaked at an annual rate of 9.1%, the highest in four decades.

This time may be no different: Inflation is already spilling over into other parts of the economy.

Particularly concerning in the September consumer inflation report was the surprising rebound in housing and rent costs, a significant contributor to inflation that had cooled off in the spring and summer. And the cost of other services rose higher than expected, too – prices that tend to rise (and stay high) as yoga studios, lawn services and the like charge their customers more to make up for their rising costs.

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Also driving inflation: Investment in data centers and technology powering AI has propelled the economy into overdrive – and maybe helped overheat it. Prices for electricity, building materials, labor, and personal tech like smartphones and laptops have all risen as a result.

More war? This energy price spike could get worse before it gets better. Trump has strongly hinted (and CNN has reported ) that the United States and Israel could escalate the war with Iran after the midterm elections, potentially sending oil prices higher.

It would be foolhardy for the Fed to make a decision based on a rumor. And energy prices can quickly swing lower. For example, the Trump administration’s announcement of an energy ceasefire in Russia has held surprisingly well, dramatically increasing the amount of diesel Russia produced in the past couple weeks, which could significantly lower global diesel prices – if Ukraine continues to hold off on its drone strikes on Russian refineries.

But the prolonged energy price spike is already raising prices across the economy, and waiting to hike again could place the Fed behind the curve.

Boiling frogs. Rate hikes work with a delayed effect, and sharper rate changes can have deleterious effects on the financial system, markets and the economy. This economic frog tends to stay in the pot when the heat is turned up gradually.

If escalations in the Iran war and Russia-Ukraine war resume, that could force the Fed into a difficult position of hiking rates by even more than expected in its next meeting in December – potentially by a half point, in a kind of make-up call.

The massive, successive rate hikes throughout 2022 sent the stock market into its biggest annual decline since the financial crisis and put the housing market on ice. But the economy didn’t go into a recession – a trick the Fed has rarely pulled off when it hikes rates.

It’s not a wager a lot of economists are eager to place again.

穆罕默德·埃瑟/阿纳多卢/盖蒂图片社

生活成本是选民投票时最关心的问题，但美联储周三看到了美国持续存在的通胀问题，却选择不采取任何措施。

至少在接下来的六周内是这样。

尽管过去一年消费者价格上涨了 3.7%，美联储首选的通胀指标也持续比央行目标高出 50%，但维持利率不变的决定在意料之中。

这是因为调整利率是一种粗暴的手段，如果时机不当或使用不当，可能会对经济造成严重损害。

美联储主席凯文·沃什周三在新闻发布会上表示：“利率就像缝隙一样，影响着一切。”

央行上个月刚刚进行了三年多来的首次加息，他们希望再观察一段时间，看看经济的反应，然后再决定是否再次大幅加息。

沃什表示：“确保物价稳定和监控通胀并非取决于日历上的某个固定日期或某个孤立的数据点，而是要确保我们拥有明确的目标和正确的货币政策。”

沃什表示，自美联储9月份加息以来，通胀预期有所下降，这让他感到鼓舞。

然而，美联储的等待也是一场巨大的赌博。美联储有可能重蹈2021年的覆辙，当时它以为只要对迫在眉睫的通胀怪兽视而不见就能将其击败。（美联储的判断大错特错）。

这一次或许真的有所不同，不仓促行事可能会被证明是明智之举。

或者，这可能会迫使央行在12月对经济进行一些冲击疗法，而如果通过10月份加息，央行或许可以避免这种情况。

就业。加息会增加企业的借贷成本，导致它们用于招聘的资金减少。

现在或许不是干预就业市场的风险时期：美国9月份仅新增​​2.9万个就业岗位，远低于预期。9月份的报告还显示，过去两个月新增就业岗位比此前预期减少了6万个。

劳动力市场状况虽不算糟糕，但一直不稳定。美国经济在7月份减少了1万个工作岗位，过去16个月中有7个月都出现了这种情况。尽管失业率仍维持在健康的4.2%，但经济学家们将当前的经济状况描述为“低招聘，低解雇”。

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换句话说，你的职位可能不会有危险，但如果你离职，你可能很难找到新工作。

市场方面，自美联储上次加息以来，美国国债收益率持续走高，一度触及数十年来的最高水平。此后收益率略有回落，回落至9月中旬的水平，但目前相对较高的国债收益率仍能为美联储的加息政策提供掩护，因为国债收益率与联邦基金利率具有类似的作用，都能抑制经济增长和通胀。

美联储也不喜欢让投资者感到意外——即便是在沃什倡导的“让投资者猜不透”的新时代。根据芝加哥商品交易所（CME）的FedWatch工具显示，市场此前已消化了美联储维持利率不变的91%的可能性，而加息可能会引发市场痛苦的再平衡。

时机。美联储的决定可能也受到了即将到来的选举的影响，至少在一定程度上。前明尼阿波利斯联储主席纳拉亚纳·科切拉科塔告诉我的同事马特·伊根，美联储周三犹豫是否加息，是因为它想避免受到唐纳德·特朗普总统的批评。但我的同事伊丽莎白·布赫瓦尔德也指出，纵观美联储的历史，它曾在选民前往投票站之际多次调整利率。

“暂时性”错误：美联储通常不会干预由供应冲击（例如伊朗战争引发的能源危机）导致的通胀。这类通胀历来具有短暂性、难以预测且对利率变化不敏感。

但供应冲击有时会导致更大的问题，而美联储可以帮助解决这些问题。美联储应该很清楚这一点：它刚刚经历过这种情况。

随着经济从疫情中复苏，美联储在通胀问题上犯了一个错误，声称通胀是由与俄乌战争和大规模供应链中断相关的“暂时性”供应冲击造成的。最终，通胀演变成一代人以来最严重的通胀问题。美联储措手不及，被迫以历史性的速度加息——连续三次加息，每次加息幅度为0.75个百分点。

最终，美联储成功地将失控的通货膨胀率降至更可控的水平，但在此之前，消费者价格年增长率达到了 9.1%，为四十年来最高水平。

这一次可能也不例外：通货膨胀已经蔓延到经济的其他领域。

9月份消费者通胀报告中，住房和租金成本意外反弹尤其令人担忧。住房和租金成本是推动通胀的重要因素，此前在春夏季节曾有所降温。其他服务的价格涨幅也超出预期——瑜伽馆、草坪服务等行业为了弥补成本上涨，往往会提高收费，导致价格持续高企。

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此外，对数据中心和人工智能技术的投资也推高了通货膨胀，使经济高速增长——或许也导致了经济过热。电力、建筑材料、劳动力以及智能手机和笔记本电脑等个人科技产品的价格均因此上涨。

战争会继续吗？能源价格飙升的情况可能会先恶化后好转。特朗普强烈暗示（CNN也报道过），美国和以色列可能会在中期选举后升级与伊朗的战争，这可能会推高油价。

美联储若仅凭谣言就做出决定，实属鲁莽。而且能源价格可能迅速下跌。例如，特朗普政府宣布的俄罗斯能源停火协议出人意料地有效，在过去几周内大幅提高了俄罗斯的柴油产量，如果乌克兰继续停止对俄罗斯炼油厂的无人机袭击，这可能会显著降低全球柴油价格。

但能源价格持续飙升已经推高了整个经济的价格，如果美联储再等一次加息，可能会使其落后于形势。

温水煮青蛙。加息的效果需要一段时间才能显现，而剧烈的利率变动会对金融体系、市场和经济造成不利影响。经济中的这只青蛙，如果温度逐渐升高，往往会一直待在锅里。

如果伊朗战争和俄乌战争再次升级，可能会迫使美联储在 12 月的下次会议上加息幅度超出预期，甚至可能加息 0.5 个百分点，以弥补之前的不足。

2022年一系列大规模的连续加息导致股市遭遇金融危机以来最大的年度跌幅，并使房地产市场陷入停滞。但经济并未陷入衰退——这是美联储加息以来鲜少能做到的。

很多经济学家都不愿意再次下这样的赌注。