How should the Fed’s performance be judged? In their latest note, Stephen Jen and Joana Freire argue that inflation control offers a clear benchmark — and by that measure, the Fed’s record in this cycle has been poor. Rate hikes were initiated far too late, rate cuts came far too slowly, and the federal funds rate remains too high relative to inflation trends.
“In the current cycle, the Fed was very late in initiating rate hikes in March 2022 (15 months too late), very late in initiating rate cuts in September 2024 (20 months too late), and the current level of the FFR seems too high (by 200 bps). In fact, the Fed had the worst performance in inflation control in this cycle than at any time since 1971.” — Stephen Jen and Joana Freire, September 5, 2025
The authors show that, despite concerns about sticky disinflation, today’s inflation trajectory looks similar to past cycles — but with a much higher policy rate. This underscores the view that the Fed has been behind the curve both on the way up and on the way down.
While Fed independence remains essential, Jen and Freire argue that the political pressure now facing the Fed is in part a consequence of its own policy errors. Looking ahead, they expect further rate cuts, a possible end to QT, and a resumption of dollar weakness as the US economy soft lands.
Table of Contents
- Summary
- We make some observations
- Other thoughts
- Bottom line
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