Is the Federal Reserve reviewing the connection between high inflation and the past two years’ U.S. monetary policy? A reporter asked Fed Chairman Jerome Powell that question at a June 15 news conference. After acknowledging that the Fed is doing so “very carefully,” the chairman deflected. He said that for decades inflation was “dominated by disinflationary forces,” but recent history has been plagued by “extraordinary shocks.” Pointing to the pandemic, the war in Ukraine and shutdowns in China, he concluded: “We’re aware that a different set of forces are driving the economy.”

Yet Mr. Powell neglected to mention the expansionary monetary and fiscal policies of 2020 and 2021 that surely contributed to upward pressure on prices. More important, he missed the main culprit: the Federal Reserve. The Fed lost control of inflation by abandoning its decadeslong strategy of pre-emptive restraint—that is, tightening before inflation takes hold. That policy, promoted by Fed Chairman Paul Volcker in the 1980s, has delivered price stability for nearly 40 years.



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