When Federal Reserve Chair Jerome H. Powell addresses the public Wednesday, he might be tempted to take a bow. Mr. Powell has been a steadying force through President Donald Trump’s trade wars and repeated threats to fire him, a once-in-a-century pandemic and, now, the worst inflation crisis in 40 years.
With inflation easing, calls are growing louder for the Fed to stop raising interest rates. While that is tempting, Mr. Powell cannot declare victory over inflation yet. Another rate increase is all but certain on Wednesday and Fed officials need to keep signaling they are still in a “hawkish” mode in which taming inflation is their sole objective.
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End of carousel- D.C. Council reverses itself on school resource officers. Good.
- Virginia makes a mistake by pulling out of an election fraud detection group.
- Vietnam sentences another democracy activist.
- Biden has a new border plan.
The D.C. Council voted on Tuesday to stop pulling police officers out of schools, a big win for student safety. Parents and principals overwhelmingly support keeping school resource officers around because they help de-escalate violent situations. D.C. joins a growing number of jurisdictions, from Montgomery County, Md., to Denver, in reversing course after withdrawing officers from school grounds following George Floyd’s murder. Read our recent editorial on why D.C. needs SROs.
Gov. Glenn Youngkin (R) just withdrew Virginia from a data-sharing consortium, ERIC, that made the commonwealth’s elections more secure, following Republicans in seven other states in falling prey to disinformation peddled by election deniers. Former GOP governor Robert F. McDonnell made Virginia a founding member of ERIC in 2012, and until recently conservatives touted the group as a tool to combat voter fraud. D.C. and Maryland plan to remain. Read our recent editorial on ERIC.
In Vietnam, a one-party state, democracy activist Tran Van Bang was sentenced on Friday to eight years in prison and three years probation for writing 39 Facebook posts. The court claimed he had defamed the state in his writings, according to Radio Free Asia. In the past six years, at least 60 bloggers and activists have been sentenced to between 4 and 15 years in prison under the law, Human Rights Watch found. Read more of the Editorial Board’s coverage on autocracy and Vietnam.
The Department of Homeland Security has provided details of a plan to prevent a migrant surge along the southern border. The administration would presumptively deny asylum to migrants who failed to seek it in a third country en route — unless they face “an extreme and imminent threat” of rape, kidnapping, torture or murder. Critics allege that this is akin to an illegal Trump-era policy. In fact, President Biden is acting lawfully in response to what was fast becoming an unmanageable flow at the border. Read our most recent editorial on the U.S. asylum system.
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History is full of painful examples in which central banks gave up the inflation fight too soon. The United States’ experience in the 1970s is one such warning. Inflation appeared to be moderating twice during that decade, only to spike again because of energy crises. It’s nearly impossible to predict when large-scale shocks will rock the economy, but the memory of $5 gas remains fresh (even though it’s around $3.50 now). It is far worse to let up too soon and see inflation roar back than it is to stay tight until it is clear inflation is stamped out. The fact that lower-income workers are not yet facing layoffs underscores how robust the labor market remains and should also embolden the Fed to stay focused on inflation.
Some prominent voices, including former treasury secretary Lawrence H. Summers, are urging the Fed not to signal any further rate increases after Wednesday. They argue flexibility going forward is key. But to truly preserve its freedom to act, the Fed will have to continue talking tough. Investors are eager for any signs that the Fed is pausing rate hikes. Markets have already been rallying this year, largely on the belief that the Fed will end its tightening sooner than expected — and even start cutting rates by the end of the year. If markets continue rising on optimistic expectations about the Fed’s intentions, it would get only harder for the Fed to dash them, risking a painful market reaction. Unfortunately, Mr. Powell needs to push back.
For now, the Fed needs to keep talking tough on inflation and signaling more hikes. If the Fed determines that it can ease up later this year, it will be easy to lighten up then, exceeding expectations rather than confounding them.