The Fed's monetary policy prison

How Congress has left the central bank between a rock and a hard place

Jerome Powell.

At the end of this month, the Federal Reserve will decide once again what to do about interest rates. Virtually everyone thinks it will cut. But while the expectation is nearly unanimous, it certainly isn't uncontroversial. Speaking for many mainstream analysts, Mohamed A. El-Erian, a former economic adviser to President Obama, pointed out that an interest rate cut will come with real trade-offs: It will leave the central bank less prepared for the next recession, or possibly exacerbate the next financial bubble.

That does not mean the Fed shouldn't cut. It does mean the Fed is stuck in a policy prison where it has very little room to maneuver, and where none of its options are great.

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Jeff Spross

Jeff Spross was the economics and business correspondent at TheWeek.com. He was previously a reporter at ThinkProgress.