This Market Is a Teenager Who Needs to Be Grounded

The US Federal Reserve is under pressure to stop raising interest rates lest it plunge the entire world into recession. This concern is not unfounded. Nonetheless, the Fed must not be deterred from its task: Like a parent disciplining a difficult child, it knows what it has to do, even though it may not relish doing it.

This metaphor — how monetary policy is like parenting — is admittedly homespun but surprisingly useful. Let’s see how far we can take it.

First, about that concern over a recession: It is the very members of the Fed who are most worried about unemployment and the plight of the poor who should be most firm in their resolve to bring down inflation. This may seem contradictory. Economists (like myself) concerned about employment have typically been on the other side of the debate from those concerned about inflation.

But calling on the Fed to stop raising rates before it “breaks” the financial markets — or worse, the labor markets — is overly cautious. It risks exacerbating the pain it seeks to mitigate.