On the January FOMC

​The statement acknowledges that the pace of recovery has slowed in recent months, which equity markets seem to be treating as new news. In fact, it is a token that the Fed isn’t even remotely considering changing its policy posture. In the press conference, Powell was asked twice about GameStop, and whether it indicated a bubble caused by “easy money.” He didn’t let himself be baited into an “irrational exuberance” gaffe, arguing correctly that easy money was appropriate after the economic shock of the pandemic. When asked about whether the Fed would react to a surge in inflation, he said it was a matter of “credibility” for it not to do so, in light of a decade of disinflation and the new average-inflation targeting regime in which inflation above 2% for some period is seen as desirable.