Waller, Christopher (1959- )

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Powell Warns Trump Tariffs Could Trigger Higher Inflation and Slower Growth

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Jerome H. Powell warned that President Trump’s tariffs could lead to a “challenging scenario” for the central bank.Jerome H. Powell, the chair of the Federal Reserve, stressed that the tariffs announced so far go well beyond what the Fed had expected even in its worst-case scenario.Haiyun Jiang for The New York TimesAs President Trump’s trade policy has started to take shape, officials at the Federal Reserve have been more vocal about how such sweeping tariffs will affect the economy.Jerome H. Powell, the chair of the central bank, recently warned that levies of the scope and scale Mr. Trump was pursuing would most likely lead to even higher inflation and slower growth than initially expected — the makings of what’s known as a stagflationary shock.Mr. Powell expanded on those remarks on Wednesday, stressing that the tariffs announced so far go well beyond what the Fed had expected even in its worst-case scenario. In a speech at the Economic Club of Chicago, he laid out in greater detail how the Fed would deal with a situation in which its goals for a healthy labor market as well as low and stable inflation clashed with each other.“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Mr. Powell said. “If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”In a moderated discussion after his speech, Mr. Powell said the Fed would have to make “what will no doubt be a very difficult judgment” about which of its goals to prioritize.Mr. Powell’s comment accelerated a sell-off in stocks, with the S&P 500 ending the day down more than 2 percent. U.S. government bonds rallied, while the dollar continued to weaken against a basket of major currencies.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Can the Federal Reserve Look Past Trump’s Tariffs?

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    Top officials are grappling with how to handle potential price increases caused by the administration’s policies.As President Trump’s efforts to restructure the global trade system with expansive tariffs begin to take shape, one question continues to dog officials at the Federal Reserve: How will these policies impact the central bank’s plans to lower interest rates?One influential Fed governor made clear on Monday that he did not expect Mr. Trump’s policies to derail the Fed’s efforts to get inflation under control, suggesting instead that fresh interest rate cuts are still in play this year.“My baseline view is that any imposition of tariffs will only modestly increase prices and in a nonpersistent manner,” Christopher J. Waller, the official, said in remarks at an event in Australia Monday evening. “So I favor looking through these effects when setting monetary policy to the best of our ability.”Economists are concerned that tariffs, which are essentially taxes on American consumers, will increase prices in the United States, at least temporarily, and over time slow economic growth.Mr. Waller acknowledged that the economic impact of the tariffs could be larger than anticipated depending on how they are structured and later put in place. But he suggested that any uptick in prices from tariffs could be blunted by other policies, which could have “positive supply effects and put downward pressure on inflation.”Mr. Waller’s views matter given that he is one of the seven officials who make up the Board of Governors and votes at every policy meeting.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    A Fed Governor Reiterates That Rate Cuts Are Coming

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    Christopher Waller, one of seven Washington-based Fed governors, said officials should cut rates as inflation cools — though timing was uncertain.A prominent Federal Reserve official on Tuesday laid out a case for lowering interest rates methodically at some point this year as the economy comes into balance and inflation cools — although he acknowledged that the timing of those cuts remained uncertain.Christopher Waller, one of the Fed’s seven Washington-based officials and one of the 12 policymakers who get to vote at its meetings, said during a speech at the Brookings Institution on Tuesday that he saw a case for cutting interest rates in 2024.“The data we have received the last few months is allowing the committee to consider cutting the policy rate in 2024,” Mr. Waller said. While noting that risks of higher inflation remain, he said, “I am feeling more confident that the economy can continue along its current trajectory.”Mr. Waller suggested that the Fed should lower interest rates as inflation falls. Because interest rates do not incorporate price changes, otherwise so-called real rates that are adjusted for inflation would otherwise be climbing as inflation came down, thus weighing on the economy more and more heavily.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    What to Watch at the Fed’s Final Meeting of 2023

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    Federal Reserve officials are widely expected to leave interest rates unchanged, but economists will watch for hints at what’s next.Federal Reserve officials will wrap up a year of aggressive inflation fighting on Wednesday afternoon, when they are expected to use their final policy decision of 2023 to leave interest rates at their highest level in 22 years.The Fed is finishing the year on pause after the most intense campaign of interest rate increases in decades, one meant to snuff out the rapid price gains that have been bedeviling consumers since 2021.Because inflation has now moderated substantially, central bankers have increasingly signaled that they may be done raising borrowing costs, which are set to a range of 5.25 to 5.5 percent. The question investors will be focused on Wednesday is how much rates are expected to come down in 2024 — and when those cuts might begin.The Fed will release its statement and a fresh set of quarterly economic projections at 2 p.m., followed by a news conference with Jerome H. Powell, the Fed chair, at 2:30 p.m. Here’s what to watch.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    What’s Next for Interest Rates? An Era of ‘Peak Uncertainty.’

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    Federal Reserve officials could keep all options on the table at their meeting this week, even as data shape up according to plan.When Jerome H. Powell, the Federal Reserve chair, takes the stage at his postmeeting news conference on Wednesday, investors and many Americans will be keenly focused on one question: When will the Fed start cutting interest rates?Policymakers raised borrowing costs sharply between March 2022 and July, to a 22-year high of 5.25 to 5.5 percent, in a bid to wrestle rapid inflation under control by cooling the economy. They have paused since then, waiting to see how the economy reacted.But with inflation moderating and the job market growing at a more modest pace, Wall Street increasingly expects that the Fed could start cutting interest rates soon — perhaps even within the first three months of 2024.Fed officials have been hesitant to say when that might happen, or to even promise that they are done raising interest rates. That’s because they are still worried that the economy could pick back up or that progress taming inflation could stall. Policymakers do not want to declare victory only to have to walk that back.Mr. Powell is likely to strike a noncommittal tone this week given all the uncertainty, economists said. After their decision on Wednesday, Fed officials will release a fresh quarterly Summary of Economic Projections showing where they think rates will be at the end of 2024, which will indicate how many rate cuts they expect to make, if any. But the projections will offer few hints about when, exactly, any moves might come.And both the Fed’s forecasts and Wall Street’s expectations could mask a stark reality: There is a wide range of possible outcomes for interest rates next year, depending on what happens in the economy over the next couple of months.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Fed Officials Hint That Rate Increases Are Over, and Investors Celebrate

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    Stocks and bonds were buoyed after even inflation-focused Federal Reserve officials suggested that rates may stay steady.Federal Reserve officials appear to be dialing back the chances of future interest rate increases, after months in which they have carefully kept the possibility of further policy changes alive for fear that inflation would prove stubborn.Several Fed officials — including two who often push for higher interest rates — hinted on Tuesday that the central bank is making progress on inflation and may be done or close to done raising borrowing costs. Economic growth is cooling, reducing the urgency for additional moves.Christopher Waller, a Fed governor and one of the central bank’s more inflation-focused members, gave a speech on Tuesday titled “Something Appears to Be Giving,” an update on a previous speech that he had titled “Something’s Got to Give.”“I am encouraged by what we have learned in the past few weeks — something appears to be giving, and it’s the pace of the economy,” Mr. Waller said. “I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2 percent.”Michelle Bowman, another Fed governor who also tends to be inflation-focused, said that she saw risks that factors like higher services spending or climbing energy costs could keep inflation elevated. She said that it was still her basic expectation that the Fed would need to raise rates further. Even so, she did not sound dead-set on such a move, noting that policy was not on a “preset course.”“I remain willing to support raising the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or is insufficient to bring inflation down to 2 percent in a timely way,” Ms. Bowman said.Taken together with other recent remarks from Fed officials, the latest comments offer an increasingly clear signal that central bank policymakers may be finished with their campaign to increase interest rates in a bid to slow demand and cool inflation. Interest rates are already set to a range of 5.25 to 5.5 percent. The Fed’s next meeting will take place on Dec. 12-13, and investors are overwhelmingly betting that the central bank will hold rates steady, as policymakers did at their last two meetings.Investors appeared buoyed by the Fed officials’ comments. Higher interest rates raise costs for consumers and companies, typically weighing on markets. The two-year Treasury yield, which is sensitive to changes in investors’ interest rate expectations, fell noticeably on Tuesday morning, extending its drop through the afternoon. Yields fall as prices rise. The move initially provided a tailwind to the stock market, helping lift the S&P 500 from its earlier fall to a gain of 0.4 percent, before the rally eased and the index drifted lower to an eventual rise of 0.1 percent.Fed officials have been nervously watching continued strength in the economy: Gross domestic product expanded at a breakneck 4.9 percent annual rate in the third quarter. The concern has been that continued solid demand will give companies the wherewithal to continue raising prices quickly.But recently, job growth has eased and consumer price inflation has shown meaningful signs of a broad-based slowdown. That is giving policymakers more confidence that their current policy setting is aggressive enough to wrestle price increases fully under control.Still, as both Mr. Waller and Ms. Bowman made clear, Fed officials are not yet ready to definitively declare victory — data could still surprise them. And while a recent run-up in longer-term interest rates had been helping to cool the economy, the move has already begun to reverse as investors predict a gentler Fed policy path.The 10-year Treasury yield, one of the most important interest rates in the world, has fallen drastically in recent weeks after shooting up in previous months, curtailing a sell-off in the stock market and lifting investor optimism. But higher stock prices and cheaper borrowing costs could prevent growth and inflation from slowing as quickly.“The recent loosening of financial conditions is a reminder that many factors can affect these conditions and that policymakers must be careful about relying on such tightening to do our job,” Mr. Waller said on Tuesday. More

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    Investors Are Calling It: The Federal Reserve May Be Done Raising Rates

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    Investors doubt that central bankers will lift borrowing costs again following big market moves that are widely expected to cool growth.Investors are betting that the Federal Reserve, which has raised interest rates to their highest levels in 22 years, may finally be finished.Several top Fed officials have indicated in recent days that the central bank’s effort to cool the economy through higher borrowing costs is being amplified by recent market moves that are essentially doing some of that job for them.In particular, attention has focused on a run-up in interest rates on U.S. government debt, with the yield on the 10-year Treasury bond briefly touching a two-decade high last week. That yield is incredibly important because it acts as the market’s foundation, underpinning interest rates on many other types of borrowing, from mortgages to corporate debt, and influencing the value of companies in the stock market.Philip N. Jefferson, the vice chair of the Fed, said this week that although “it may be too soon to say confidently that we’ve tightened enough,” higher market rates can reduce how much businesses and households spend while depressing stock prices. He added that the Fed wanted to avoid doing too much and hurting the economy unnecessarily.Given that, he said the Fed “will be taking financial market developments into account along with the totality of incoming data in assessing the economic outlook.”Investors have sharply reduced expectations of another rate increase before the end of the year. They see about a one-in-four chance that policymakers could lift rates again.“If financial conditions are tightening independent of expectations for monetary policy” then “that will reduce economic activity,” said Michael Feroli, the chief U.S. economist at J.P. Morgan. “Things change, you change your forecast.”Investors have expected the Fed to stop raising interest rates before and been proven wrong. There is still a chance now that the market dynamics that are helping to raise borrowing costs could reverse, and this week, some of the recent pop in the yield on 10-year bonds has eased. But if market rates stay high, it could keep adding to the substantial increase in borrowing costs the Fed had already ushered in for consumers and companies.Philip Jefferson, the vice chair of the Federal Reserve, said that “it may be too soon to say confidently that we’ve tightened enough to return inflation.”Ann Saphir/ReutersThe Fed has raised its key interest rate from near zero to above 5.25 percent over the past 19 months in an attempt to tame inflation. But the Fed directly controls only very short-term rates. It can take a while for its moves to trickle through the economy to affect longer-term borrowing costs — the kind that influence mortgages, business loans and other areas of credit.There are likely several reasons those longer term rates in markets have climbed sharply over the past two months. Wall Street may be coming around to the possibility that the Fed will leave borrowing costs set to high levels for a long time, economic growth has been strong, and some investors may be concerned about the size of the nation’s debt.Over time, the rise in yields on Treasury bonds is likely to weigh on the economy, and Fed officials have been clear that it could do some of the work of further raising interest rates for them.Officials had forecast in September that they might need to make one more rate move this year. But comments by Mr. Jefferson, along with some of the Fed’s more inflation-focused members have been widely seen as a signal that the Fed is likely to be more cautious.Christopher J. Waller, a Fed governor who has often favored higher rates, said at an event on Wednesday that officials were in a position to “watch and see” what happens, and would keep a “very close eye” on the move and “how these higher rates feed into what we’re going to do with policy in the coming months.”Lorie K. Logan, president of the Federal Reserve Bank of Dallas, said on Monday that higher market yields “could do some of the work of cooling the economy for us, leaving less need for additional monetary policy tightening.”But she noted that it would depend on why rates were rising. If they had climbed because investors wanted to be paid more to shoulder the risk of holding long-term bonds, the change was likely to squeeze the economy. If they had climbed because investors believed the economy was capable of growing more strongly even with high rates, it would be a different story.The yield on 10-year Treasury bonds soared to its peak this month, a sharp move that has subsequently jolted mortgage rates.Caitlin O’Hara for The New York TimesEven Michelle W. Bowman, a Fed governor who tends to favor higher rates, has softened her stance. Ms. Bowman said on Oct. 2 that further adjustment would “likely be appropriate.” But in a speech she delivered on Wednesday, that wording was less definitive: She said policy rates “may need to rise further.”The softer tone among Fed officials appears to have helped halt the rise in market rates, with the yield on the 10-year Treasury bond easing 0.2 percentage points so far this week. On Tuesday, the yield fell by the most in a day since the turmoil induced by the banking crisis in March. That likely reflected investors who rushed to the safety of U.S. government debt as war broke out in Israel and Gaza. Still, the yield remains around 4.6 percent, roughly 0.8 percentage points higher than at the start of July.“It seems like there is a little skittishness,” said Subadra Rajappa, head of U.S. rates strategy at Société Générale.Higher interest rates also typically weigh on stock prices, with major indexes under pressure over the summer alongside the rise in yields. The S&P 500 suffered its worst month of the year through September but has risen 2 percent so far this month, alongside retracing yields.Policymakers will get another read on the effect of rate rises with the release of the Consumer Price Index on Thursday. Economists expect the data to show a gradual slowdown in inflation is continuing, despite the unexpected resilience of the economy.That could change, however, especially if yields continue to fall, relieving some of the pressure on the economy.A robust economy could keep the possibility of another Fed rate move alive, even if investors see it as unlikely. Ms. Logan warned that policymakers should avoid overreacting to market moves if they quickly fade.And Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said on Tuesday that long-term rates might have moved up in part because investors expected the Fed to do more. Therefore, if the Fed signals that it will be less aggressive, they could retreat.“It’s hard for me to say definitively — hey, because they have moved, therefore we don’t have to move,” Mr. Kashkari said. “I don’t know yet.” More

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    What Is Happening in the Housing Market?

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    Home construction surged in May and prices have ticked up, even with interest rates at a 15-year high. The resilience has surprised some economists.Gianni Martinez, 31, thought that it would be fairly easy to buy an apartment.Mortgage rates are now hovering around 7 percent — the highest they’ve been since 2007 — thanks to the Federal Reserve’s efforts to tame inflation. Central bankers have lifted their official policy rate to about 5 percent over the past 15 months, which has translated into higher borrowing costs across the economy.Mr. Martinez, a tech worker, expected that to cool down Miami real estate. But instead, he is finding himself in stiff competition for one- to two-bedroom apartments near the ocean. He has made seven or eight offers and is willing to put 25 percent down, but he keeps losing, often to people paying cash instead of taking out a pricey mortgage.“Because of interest rates at 7 percent, I didn’t think it would be this competitive — but that doesn’t matter to cash buyers,” Mr. Martinez said, noting that he’s competing with foreign bidders and other young people who show up to open houses with their parents in tow, suggesting Mom or Dad may be helping to foot the bill.“When there is a correctly priced listing, it’s a madhouse,” he said.The Fed’s rate increases are aimed at slowing America’s economy — in part by restraining the housing market — to try to bring inflation under control. Those moves worked quickly at first to weaken interest-sensitive parts of the economy: Housing markets across the United States pulled back notably last year. But that cool-down seems to be cracking.Home prices fell nationally in late 2022, but they have begun to rebound in recent months, a resurgence that has come as the market has proved especially strong in Southern cities including Miami, Tampa and Charlotte. Fresh data set for release on Tuesday will show whether that trend has continued. Figures out last week showed that national housing starts unexpectedly surged in May, jumping by the most since 2016, as applications to build homes also increased.Housing seems to be finding a burst of renewed momentum. Climbing home prices will not prop up official inflation figures — those are based on rental rather than purchased housing costs. But the revival is a sign of how difficult it is proving for the Fed to curb momentum in the economy at a time when the labor market remains strong and consumer balance sheets are generally healthier than before the pandemic.“It’s another data point: Things are not cooling off as much as they thought,” said Kathy Bostjancic, chief economist for Nationwide Mutual. In fact, new housing construction “tells us something about where the economy is headed, so this suggests that things are potentially picking up.”

    Note: Data is seasonally adjusted.Source: S&P CoreLogic Case-Shiller IndexBy The New York TimesThat could matter for policy: Fed officials think that the economy needs to spend some time growing at a speed that is below its full potential for inflation to fully cool off. In a weak economy, consumers don’t want to buy as much, so companies struggle to charge as much.The question is whether the economy can slow sufficiently when real estate is stabilizing or even heating back up, leaving homebuilders feeling more optimistic, construction companies hiring workers and homeowners feeling the mental boost that comes with climbing home equity.So far, the Fed’s leader, at least, has sounded unworried.“The housing sector nationally has flattened out, and maybe ticked up a little bit, but at a much lower level from where it was,” Jerome H. Powell, the Fed chair, told lawmakers last week, adding a day later that “you’ve actually kind of seen it hit a bottom now.”Higher rates have helped to markedly cool down sales of existing homes, to his point, though demand for new houses is being bolstered by two sweeping long-run trends.Millennials — America’s largest generation — are in their late 20s and early 30s, peak years for moving out on their own and attempting to purchase a house.And a shift to remote work during the pandemic seems to have spurred people who might otherwise have stayed with roommates or parents to live on their own, based on recent research co-written by Adam Ozimek, chief economist at the Economic Innovation Group.“Remote work means working from home for a lot of people,” Mr. Ozimek said. “That really increases the value of space.”Available housing supply, meantime, has been tight. That’s also partly because of the Fed. Many people refinanced their mortgages when interest rates were at rock bottom in 2020 and 2021, and they are now reluctant to sell and lose those cheap mortgages.“The most surprising thing about this housing market is how the increase in interest rates has affected supply and demand pretty equally,” said Daryl Fairweather, chief economist at Redfin. The pullback in demand was probably a bit more intense, she said, but builders are benefiting from a “dire lack of supply.”As young people continue to bid on houses and inventory comes up short, prices and construction are staging their surprise comeback.“Demand has hung in there better than we would have expected for that first-time buyer,” said Michael Fratantoni, chief economist at the Mortgage Bankers Association. Ms. Bostjancic said that the recent housing data will probably nudge the Fed toward higher rates. Officials paused their rate moves in June after 10 straight increases, but have suggested that they could lift them twice more in 2023, including at their meeting next month.If there’s a silver lining for the Fed, it is that home prices will not directly feed into inflation. America’s price measures use rents to calculate housing costs because they try to capture the cost of consumption. Buying a home is, in part, a financial investment.Rent growth has been stalling for months now — which is slowly feeding into official inflation data as people renew leases.“Rent growth is taking a nice, deep breath in,” said Igor Popov, chief economist at Apartment List. “Right now, it does not feel like there’s a lot of new heat.”Still, at least one Fed official has fretted that the pickup in housing could limit the scope of that slowdown. As home prices rise, some investors and landlords could decide to either charge more or to shift from renting out houses and to buying and selling them — curbing rental supply.“A rebound in the housing market is raising questions about how sustained those lower rent increases will be,” Christopher Waller, a Fed governor, said in a speech last month.He said that the upturn “even with significantly higher mortgage rates” raised questions “about whether the benefit from the slowing in rent increases will last as long as we have been expecting.” More

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    Fed Confronts Why It May Have Acted Too Slowly on Inflation

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    Central bankers have been asking whether they should have reacted faster to rising inflation last year — and are learning from the recent past.Some Federal Reserve officials have begun to acknowledge that they were too slow to respond to rapid inflation last year, a delay that is forcing them to constrain the economy more abruptly now — and one that could hold lessons for the policy path ahead.Inflation began to accelerate last spring, but Fed policymakers and most private-sector forecasters initially thought price gains would quickly fade. It became clear in early fall that fast inflation was proving to be more lasting — but the Fed pivoted toward rapidly removing policy support only in late November and did not raise rates until March.Several current and former Fed officials have suggested in recent days that, in hindsight, the central bank should have reacted more quickly and forcefully last fall, but that both profound uncertainty about the future and the Fed’s approach to setting policy slowed it down.Officials had spent years dealing with tepid inflation, which made some hesitant to believe that rapidly rising prices would last. Even as they became more concerned, it took the Fed’s large group of policymakers time to come to an agreement on how to respond. Another complicating factor was that the Fed had made clear promises to markets about how it would remove support for the economy, which made adjusting quickly more difficult.“It was a complicated situation with little precedent — people make mistakes,” Randal K. Quarles, who was the Fed’s vice chair for supervision in 2021, said at a conference last week.Mr. Quarles, who left the Fed at the end of the year, argued that it should have begun to pull back support aggressively after September. He added, however, that the rate increases that central bankers were now making could still fix the situation.Even so, the delay could come with consequences. By the time the Fed completely stopped buying bonds and began raising rates in March, prices were rising 8.5 percent from a year earlier, the fastest rate since 1981. Consumer price increases are expected to remain rapid when fresh data are released Wednesday.Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.Interest Rates: As it seeks to curb inflation, the Federal Reserve began raising interest rates for the first time since 2018. Here is what the increases mean for consumers.State Intervention: As inflation stays high, lawmakers across the country are turning to tax cuts to ease the pain, but the measures could make things worse. How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.And as high prices have lingered, inflation expectations have been creeping up, threatening to change household and business behavior in ways that perpetuate the problem.Because inflation is eating away at paychecks and making it more difficult for families to afford groceries and cars, it has emerged as a major political issue for President Biden, whose approval ratings have fallen over concerns about his handling of the economy. During remarks at the White House on Tuesday, Mr. Biden called inflation his “top domestic priority” and said his administration was taking steps to contain it. He also sought to push back on Republicans, who have spent months blaming him for stoking inflation, saying their policy ideas were “extreme” and would hurt working families.“I want every American to know that I’m taking inflation very seriously,” Mr. Biden said, noting that the Fed has the “primary role” in trying to tame price increases.The Fed is now raising rates quickly to wrestle the situation back under control. Officials lifted borrowing costs half a percentage point this month, their biggest increase since 2000, while broadcasting that two more large adjustments could be coming. They are also going to start shrinking their $9 trillion balance sheet of bond holdings next month.If the Fed continues to rapidly adjust policy this year as it tries to catch up, policymakers risk slamming the brakes on a speeding economy. Such hard stops can hurt, pushing up unemployment and possibly tipping off a recession. Officials typically prefer to apply their policy brakes gradually, increasing the chances that the economy can slow down painlessly.Still, several Fed officials pointed out that it was easier to say what the Fed should have done in 2021 after the fact — that in the moment, it was difficult to know price increases would last. Inflation initially came mainly from a few big products that were in short supply amid supply chain snarls, like semiconductors and cars. Only later in the year did it become obvious that price pressures were broadening to food, rent and other areas.“I try to give some grace, and say: In a very uncertain time, with an unprecedented setting, with no real models to guide us, people are going to do the best they can,” Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, said in an interview Monday. Mr. Bostic was an early voice suggesting that the Fed should stop buying bonds and think about raising interest rates.Officials have said it was the acceleration in inflation data in September, followed by rising employment costs, that convinced them that price gains might last and that the central bank needed to act decisively. The Fed chair, Jerome H. Powell, pivoted on policy in late November as those data points added up.“It was a complicated situation with little precedent — people make mistakes,” said Randal K. Quarles, who was the Fed’s vice chair for supervision in 2021.Erin Scott/ReutersWhile Mr. Quarles argued that the Fed should have responded as the September data came in, he suggested that there had been a complicating factor: Mr. Powell was waiting to see if he would be reappointed by the Biden administration, which did not announce its decision to renominate him until mid-November.Mr. Quarles, on a “Banking With Interest” podcast episode last week, said reacting to the data was “hard to do until there was clarity as to what the leadership going forward of the Fed was going to be.”Inflation F.A.Q.Card 1 of 5What is inflation? More