The dream team Powell and Yellen screwed it up

US Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell had everything it took to work together successfully. But the dream team blew it: US inflation rose to a new record high of 8.6 percent in May.

Yellen and Powell have known each other for a long time from their time together at the Fed, where Yellen was Powell’s predecessor. Both are experienced in monetary policy as a result, with Powell also having experience in fiscal policy. Both are considered level-headed and of integrity, and Yellen also has an excellent reputation as an economist.

Cooperation between monetary and financial policy is very important: the central bank should be politically independent, but the two spheres are so closely intertwined that nothing sensible can come of it without mutual understanding between the actors.