US Fed: Behind The Curve and Behind The Crowd

The scale of the American policy response to COVID is not only unprecedented in scale, but, unlike their counterparts elsewhere, US policy-makers appear slow to withdraw their support.

We argue here that the Fed is both ‘behind the curve’ and ‘behind the crowd’. Some policy catch-up looks inevitable, but, like in the 1970s, we believe the current Fed lacks the necessary fortitude to tackle the inflation problem. Consequently, inflation will persist, with the US dollar potentially in the firing-line. We recognise that Chair Powell is probably not a Paul Volcker on inflation, but we also worry that President Biden is a Jimmy Carter for the dollar.