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HONEST ECONOMICS Mardoqueo Arteaga HONEST ECONOMICS Mardoqueo Arteaga

The Fed's Communication Channel is a Broken Functor

The article argues that the Federal Reserve’s biggest problem today is not inflation itself but the failure of its communication to reach ordinary households. While actual inflation has fallen to around 2.7%, many Americans still expect much higher inflation and feel pessimistic about the economy, leading them to behave as if inflation is still a crisis. Using an analogy from category theory, Mardoqueo explains that the Fed’s intended communication chain, from Fed announcements to financial markets to household expectations, no longer works for most people because households pay more attention to everyday prices like groceries than to markets or Fed statements. As a result, inflation expectations remain unanchored, weakening the Fed’s credibility at a sensitive political moment. Until the Fed finds a way to fix or adapt to this broken communication channel, the gap between economic reality and public perception is likely to persist.

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