The average inflation target has eroded the Fed’s credibility.

NRPLUS MEMBER ARTICLE Q uick as a flash, the Federal Reserve switched from dovish to hawkish on inflation. The Fed initially planned to wind down bond purchases by June of 2022 and raise its interest-rate target later that year. Now, the central bank says its balance sheet will stop growing in March, with rate hikes to follow shortly thereafter. The Fed’s willingness to make drastic changes in the face of new inflation data is encouraging.

But we’re not out of the woods yet. The Fed still hasn’t solved a more fundamental problem than inflation: its own lack of credibility. Markets could be in store for

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