, Columnist
The Federal Reserve Faces Its Greatest Pandemic Test Yet
After the growth shock of 2020 and the inflation shock of 2021, markets are not ready for a policy shock in 2022.
Keeping calm.
Source: Bloomberg
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The Federal Reserve has met the historic challenge of navigating the world’s largest economy through a pandemic. But as the central bank prepares to reduce its emergency Covid stimulus, finding the next normal — for monetary policy, markets and the economy — will be its greatest test yet.
In achieving a robust recovery, the latest round of quantitative easing, the fifth in the last decade, has seen the Fed’s balance sheet expand by some $4 trillion, equivalent to 20% of U.S. gross domestic product, since March 2020.