Will the Economy Ever Be Good Enough for the Fed?

Like an over-protective mother that believes no one deserves their child – at least when it comes to romantic happiness – the U.S. economy is never going to be quite good enough for the Federal Reserve Board to provide some economic delight.

That was made clear earlier this month when Fed Chairman Jerome Powell held a press conference after the central bank’s latest interest rate meeting. While most of what Powell talked about in his opening remarks was focused on the quarter-point rate cut the Federal Open Market Committee approved, his assessment of the state of the economy was carefully worded.

While saying the economy is “strong overall and has made significant progress toward our goals over the past two years” Powell made it clear we are not out of the woods just yet. The goals he referred to are the Fed’s “dual mandate” of maximum employment and price stability. And both, according to Powell, are looking good. Even job growth, which gas slowed some over the past several months “remains solid,”

But before anyone could get the impression the Fed sees blue skies ahead, Powell was quick to bring expectations back down to earth.

“We’re not declaring victory, obviously, but we feel like the story is consistent with inflation continuing to come down on a bumpy path over the next couple of years and settling around 2%,” he said.

That “bumpy road” fulfills the Fed’s predilection to couch even the most optimistic projections in pessimistic slip covers.

Earlier in the press conference, Powell spoke of the difficulty in making predictions about what is on the horizon for business and personal finance.

“the economy is quite difficult to forecast looking out past the very near term,” he said. Exactly what constitutes the very near term is unclear, but it is certainly in line with the Fed’s traditionally vague perspective on the economic future, almost as if their monetary crystal ball is made of frosted glass.

Of course, the rate cut wasn’t the big news of the week, with the Presidential election coming the day before Fed policymakers sat down for its two-day meeting on interest rates.

To further hedge his bets, Powell said the Fed will continue to move cautiously on future rate cuts, citing the potential they could trigger price hikes.

“One risk is that we would move too quickly (on interest rates) and find ourselves having moved too quickly and inflation comes back,” he said. “To avoid that risk, that means you have to move carefully.”

That’s all well and good, but maybe it’s time for the Fed to throw consumers and corporations a bone and tell us this economy meets with their approval.