May 23, 2022
The Federal Reserve should win the award for the best place to work. It’s so good at the Fed, people don’t leave!
This is going to sound like I’m bashing the Fed and its governors, but that’s not my intention. I’m pointing out some observations and how I think they likely affect Fed policy.
Consider the case of Loretta Mester, the president and chief executive officer of the Federal Reserve Bank of Cleveland. She’s also a voting member of the Federal Open Market Committee (FOMC), the body that decides interest rates.
She joined the Fed in 1985 and hasn’t left. While there’s nothing wrong with that necessarily, I think the longevity of Mester (and many others) helps breed a sense of confidence at the Fed that never wanes, even in the face of ample contrary evidence.
For example, here are some recent quotes from Mester on inflation:
“I expect some higher inflation measures in the next couple months, but that is different from underlying inflation levels reaching 2%.” – Feb. 28, 2021
“I am unconcerned with inflation running away from us.” – April 5, 2021
“I’d like to see inflation rise to 2% or higher.” – May 14, 2021
“By the end of the year, I expect inflation to be between 3.5-4.0%, with a drop in 2022.” – Aug. 27, 2021
“Inflation will be little more than 2% in the next years.” – Sept. 24, 2021
Like Mester, here are others who’ve never worked outside the Fed in their long professional careers:
- John Williams, president and CEO, Federal Reserve Bank of New York
- James Bullard, president and CEO, Federal Reserve Bank of St. Louis
- Esther George, president and CEO, Federal Reserve Bank of Kansas City
- Mary Daly, president and CEO, Federal Reserve Bank of San Francisco
- Charles Evans, president and CEO, Federal Reserve Bank of Chicago
- Raphael Bostic, president and CEO, Federal Reserve Bank of Atlanta
- Kenneth Montgomery, interim president and CEO, Federal Reserve Bank of Boston
- Meredith Black, interim president, Federal Reserve Bank of Dallas
Mester, Williams, and Bullard are FOMC members. Black and Evans are alternate members.
I bring all this up because the Fed has been adamant on inflation’s transitory nature. It said rising prices were due to supply chain anomalies that would sort themselves out soon enough. The 2% target would become reality once again.
Well, it hasn’t happened. Inflation is the highest it’s been in four decades.
It’s no wonder there’s little confidence in the Fed. Many of its leaders have never worked anywhere else and they’re often flat-out wrong.