Questions are increasingly being raised about whether the Federal Reserve should be kinder and gentler in its rate-hiking campaign, taking into account the strains from higher dollar borrowing costs and a surging dollar on foreign economies. The answer is no – the Fed’s job is at home.
Chair Jerome Powell routinely responds to these questions by confirming that the Fed is in close contact with foreign central banks and that the best contribution the US can make to global health is to vanquish inflation and achieve price stability.
US economic and financial developments clearly impact the rest of the world. But the emphasis on the ramifications of US monetary policy for other countries largely misses the mark.
The Fed has long focused on how foreign economic and financial developments impact the functioning of the US economy and the Fed’s ability to achieve its dual mandate, let alone US financial stability. Given this mandate,…
