The Federal Reserve's overly accommodative monetary policy is holding back the economy, says Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute.
"Central banks should wind down expansionary monetary policy without delay," she writes in an article for
MarketWatch.
"One of the consequences of this accommodative monetary policy has been an exuberant financial market and a weak real recovery, as monetary policy has failed to encourage investment."
Editor’s Note: Get These 4 Stocks Before 399% Stock Market Rally!
Furchtgott-Roth explains that the rally in U.S. stocks is a result of "central bank accommodation using low interest rates. Although near-zero rates are no longer effective in rallying the economy, they have sent investors into equities."
"Perhaps due to central bank expansion, the real global economic recovery has been weak, with growth driven by emerging market economies," she notes. "While growth is up, it is not on pace to fully make up lost ground. Much of the expansion has been financed by debt, as debt-to-GDP ratios in advanced economies have grown higher. Both public and private debt have grown."
While the Fed has cut back its bond purchases to $35 billion a month from $85 billion last year, its balance sheet has mushroomed to $4.3 trillion. And its federal funds rate target remains at a record low of zero to 0.25 percent.
In her press conference last month, Fed Chair Janet Yellen "did not acknowledge that loose monetary policy will eventually lead to inflation," Furchtgott-Roth argues.
"Although elsewhere in the press conference Yellen emphasized the uncertainty that lies ahead, she did not seem to see that the Fed’s policies are increasingly unproductive," she adds.
David Rosenberg, chief economist at Gluskin Sheff + Associates, thinks the central bank should change course too.
"This Fed is erring on the side of uber-accommodation far too long and is playing with fire," he writes in
The Financial Post of Canada.
The real fed funds rate may reach negative 0.5 percent by the time full employment is reached, Rosenberg says. "If this forecast proves prescient, it is difficult to believe inflation expectations at some point won’t become unhinged and send long-term bond yields substantially higher."
Editor’s Note: Get These 4 Stocks Before 399% Stock Market Rally!
© 2026 Newsmax Finance. All rights reserved.