Why Jerome Powell Could Be Trapped At Zero For Years

Why Jerome Powell Could Be Trapped At Zero For Years

Federal Reserve Board Chairman Jerome Powell speaks during a news conference after a Federal Open ... [+] Market Committee meeting on January 29, 2020 in Washington, D. C. Jerome Powell may think the Delta variant ruined his best-laid plans for the economy. The truth is, the Federal Reserve chairman lost control of his super-aggressive policies long ago. In early 2021, as the U. S. vaccination process ramped up, talk at Fed headquarters in Washington was about exit strategies from a dozen years of Japan-like monetary easing. With inflation heating up, what choice did the Fed have? Then a new Covid-19 variant flipped the script. Yet Powell's desire to normalize U. S. rates was doomed even before the pandemic arrived. There's precedent just in the last 15 years that explains why. The Fed in 2021 is more or less where the Bank of Japan was in 2006, back when Tokyo policymakers tried their hand at tapering, tightening—and then ultimately failing to normalize the interest rate environment. The details differ greatly, of course. In 2006, there was no pandemic tearing through the global economy. But that's when the BOJ decided that seven years of zero rates was long enough. It was also