Substantial further progress versus broad-based, inclusive employment

Tomorrow Fed will kick off tapering and slow its asset purchases. All eyes then shift to liftoff, when the Fed raises interest rates. It's a new Fed now no matter how much Wall Street wants old Fed.

Tapering is on for tomorrow. The Fed has painstakingly signaled the slowing of asset purchase for many months. Ain’t no taper tantrum on Jay’s watch. The economic recovery has made “substantial further progress” on both employment and inflation.

It’s been a roll coaster of a recovery for millions of American workers and their families, but we are making progress. Covid is receding again, and job gains should pick up. We have met the taper test. On Friday, we learn about October jobs. Fingers crossed for more, though it’ll be painfully clear we are far from the finish line.

Then there’s inflation. While inflation was very low in 2020—in fact, prices declined sharply in April 2020—Jay Powell made already made clear that “substantial further progress” had been made toward 2% average inflation target on a sustained basis.

Since Jay made that call, the pace of inflation has continued to step down. Inflation, excluding food and energy, which is a better predictor of total prices, in September was 2.6% at an annual rate—well below the peak of 7.7% in April. Food and energy prices are still rising at a faster pace but there are signs that we are turning the corner in commodity markets.