The US Fed Must Fix Its Policy Framework to Minimize Errors

It should re-adopt its former targets and offer alternate scenarios

- JONATHAN LEVIN

In a speech last week, US Federal Reserve Chair Jerome Powell hinted that the American central bank's five-year framework review will focus on the particulars of its maximum employment and stable price goals, as well as efforts to communicate clearly with the public. In both cases, the Fed should be guided by humility in the face of uncertainty.

The potential fracturing of the global trading system and a return to 1930s-style tariffs are developments that are expected to boost consumer prices and hurt economic growth in the US, but these propositions haven't been tested in nearly a century. It's impossible to know for sure whether price or growth effects will dominate—or whether some unforeseen third outcome will materialize.