The Fed’s ‘monetary medicine’ is starting to work, but no one knows what’s in it
A rare dissent and a medical metaphor highlight the Fed’s uncertain approach to inflation.
The story
The Fed kept rates steady, with two officials dissenting. This is the first time since 1992 that a governor and a regional president have dissented together. Fed Chair Kevin Warsh called the current approach 'monetary medicine' that is 'starting to work.'
Source: fortune.com
Our reading
The Fed’s ‘monetary medicine’ is a phrase that sounds like a doctor’s note, but it’s actually a policy decision. It implies that the economy is being treated, not managed, and that the cure is only beginning to show results. The phrase is comforting, like a doctor saying ‘you’re on the right track,’ even if the patient is still sick.
It’s strange that the Fed would use a medical metaphor to describe its own actions, especially when the ‘treatment’ has no clear endpoint. If the economy were a patient, it would be the one who keeps asking, ‘Am I better yet?’ while the doctor keeps saying, ‘We’re still figuring it out.’
Warsh’s comment about the medicine ‘starting to work’ is like saying a recipe is ‘starting to smell good’ before it’s even cooked. The economy isn’t a dish, but the Fed’s language makes it feel like one.
