Don’t Take the Federal Reserve’s Next Cut for Granted: Editorial

As expected, the Federal Reserve cut its policy rate on Sept. 17 by a quarter of a percentage point. Officials had signaled the move in advance and Chair Jerome Powell explained the reasoning well enough. Unfortunately, where monetary policy goes from here is anything but clear — and there’s little the central bank can do about it.

The Fed is grappling with incipient stagflation: above-target inflation combined with a stalling labor market. It has just one tool, the policy rate, and can’t achieve its dual mandate of stable prices and maximum employment if those goals pull in opposite directions. At the moment, ...