Long Mile

Many resources are thrown at solving the last-mile problem.  Logistics firms spend countless dollars trying to optimize the final phase of a delivery.  The same challenge haunts public transportation in many metropolitan cities.  Once a rider exits the train or bus, how do they efficiently get to their end destination?  Global Positioning System (GPS) technology has helped but the challenge has yet to be solved fully.

Our central bank could use an assist from GPS right about now.  For years they have been on a journey to corral inflation back down to an acceptable level.  With a target rate of 2.0 percent, the trend of their preferred price proxy (the Personal Consumption Expenditures Price Index excluding food and energy) hasn’t been that low since February 2021 on a year-over-year basis.  To the central bank’s credit, they have moved in the right direction as it peaked in February 2022 at 5.6 percent, but now they are struggling to make further progress.

After initial aggressive monetary policies such as raising the interest rate banks charge each other for overnight loans, the "last mile" of achieving a stable 2.0 percent is challenging.  The Fed must carefully balance between tightening enough to suppress inflation and not so much as to stifle economic growth or trigger a recession.  This stage requires precise adjustments and a keen understanding of economic indicators, much like the detailed planning needed to efficiently connect transit users with their final destinations or ensuring delivery services reach consumers in the last segment of the supply chain. The task is complicated by various factors, including global economic pressures, supply chain disruptions, and changes in consumer behavior, all requiring a nuanced approach to policymaking.  Further complicating the issue this year is the presidential election, something in which the Fed hopes to appear impartial.  Looking at the calendar, the Fed meets just two days after America decides, making the central bank’s decision then even more interesting.