Fed Takes One Step Forward, Two Steps Back

Monetary policy has been out of alignment for some time now — intentionally so, as FOMC Chair Yellen confirmed during her recent testimony. The Federal Reserve has purposely distorted funding markets after the financial crisis, with an eye towards offsetting its lingering effects.  In theory, this is not unreasonable. But when, in practice, is extraordinary monetary policy too much, too long, too self-defeating, too risky, and too desperate in pursuit of an illusory goal? The expiration date on the Fed’s adventurous policies is long past due.