Fed’s Treasury buying will come in handy as others sell

Subscribe to enjoy similar stories. “Everything keeps changing in this transitory life," according to the performance artist Laurie Anderson. The use of “transitory" was assumed to have been consigned to the dustbin of the history of the Federal Reserve’s blunders after the Fed failed to recognize that post-Covid inflation was anything but passing.

That’s why Fed Chair Jerome Powell raised more than a few eyebrows this past week when he reverted to the T word to describe the impact of tariffs, announced and anticipated, on inflation. “It can be the case that it’s appropriate sometimes to look through inflation if it’s going to go away quickly without action by us if it’s transitory. And that can be the case in the case of tariff inflation," he said at his news conference on Wednesday following the Fed’s policy meeting, at which it held rates unchanged, as expected.

That would seem consistent with the advice to monetary policymakers proffered recently by Treasury Secretary Scott Bessent: “I would hope that the failed ‘team transitory’ could get back together and think that nothing is more transitory than tariffs." By that, one infers he meant the transitory impact on inflation, not continual flip-flops as to when and whether tariffs would be imposed. There was little ambiguity about Bessent’s boss’ thoughts on monetary policy. “The Fed would be MUCH better off CUTTING RATES as U.S.

Tariffs start to transition (ease!) their way into the economy. Do the right thing," President Donald Trump posted on Truth Social. The Fed’s newly updated Summary of Economic Projections points to two cuts of one-quarter percentage point in the federal-funds target rate, from the current range of 4.25% to 4.50%, by year end.