Jerome Powell Is Fighting Inflation- and Winning

When Federal Reserve Chair Jay Powell speaks in Jackson Hole later this week, he will have no shortage of critics lying in wait to vivisect his every remark. Their nearly universal theme is that the Fed has done too little, too late to stem rising inflation. Powell, the argument goes, bought into the misguided view that 2021’s inflation would be transitory.

As a result, the Fed continued pressing on the gas when it should have been hitting the brakes, keeping interest rates at zero through 2021. To make up for those mistakes, Powell will have to convince the public that he’s abandoning the Fed’s policy framework and admit that he is prepared to deliver the pain.

The truth is far more sanguine. Yes, Powell does need to strike a solid, credibly anti-inflation tone. But the Fed has been fighting inflation since March — in both word and, more important, deed. And the effort seems to be paying off.

The Chicago Fed’s Adjusted Index of Financial Conditions, for example, measures how difficult it is for consumers and businesses to get loans. A reading below zero represents relatively easy conditions; above zero means they are relatively difficult.