Admission of Failure

Relax said the night man
We are programmed to receive
You can check out any time you like
But you can never leave
--Eagles

Following its bimonthly meeting on Wednesday, the FOMC announced that its overnight lending rate would remain unchanged in a range between 2.25-2.5%. At a news conference after the meeting and announcement, Fed Chairman Jerome Powell suggested that the central bank's previous campaign to tighten rates is over.

He also announced that the Fed's quantitative tightening (QT) program, originally anticipated to last years as the central bank unwound $trillions in securities purchased during the quantitative easing (QE) campaign, would end this fall with about $4 trillion of assets now to be kept on the Fed's balance sheet.

This all amounts to a gigantic admission of failure. Aggressive monetary policy did not create a self-sustaining recovery that could withstand a reversal of that policy.

Instead, all QE et al proved is that financial asset prices could be inflated significantly higher.

It also proved that these aggressive policies trap central banks. They can't leave these policies without willfully collapsing economies and markets.

Unfortunately, that suggests an 'unwillful' collapse when central banks can no longer suppress natural forces that seek to normalize market functioning.