THE legal mandate of the US Fed is to preserve domestic price stability and enhance employment. It, however, does not envision any role for the Fed in keeping global economic stability. It is up to each country to prepare and swim through the tides. Though the post-World War 2 US-dollar centric global financial system accorded the US a de facto lender-of-the-last-resort role, this legal mandate and reality contradiction shows up when the US domestic economic environment is not in sync with global economic conditions. The challenge facing the world today once again focuses on this dilemma.
On May 12, US Federal Reserve Chairman Jerome Powell cautioned that getting the country's inflation under control won't be easy. The credit tightening process could cause economic pain, and he can't guarantee a "soft landing," meaning — to get the inflation rate back to 2 percent from the current 8.3 percent in April while keeping the labor market strong.
