The Federal Reserve consistently says its actions are data dependent. “Data dependence is, and always has been, at the heart of policymaking at the Federal Reserve,” Fed Chairman Jerome Powell said in a 2019 speech.
But the challenge with data is that it is about the past and the Fed’s actions are about trying to shape the economic future.
The consumer inflation rate has more than doubled since the central bank first described price hikes as “transitory.” After anchoring its analysis, it took the agency 11 months of climbing inflation rates before it would act against inflation by raising its target short-term interest rate. And inflation continued heating up, partially driven up by higher energy prices thanks to Russia’s war in Ukraine — something well beyond the influence of the U.S. Federal Reserve Bank.
