The Fed does not only care about inflation. It also cares about the stability of the banking system, and the greater financial system as a whole. Sudden changes to interest rates can be extremely destabilizing to banks. Witness the bank failures as a result of the quite gradual interest rate hike recently, which gutted the value of long-term debt on their books.
Any long-term contract or instrument that has exposure to interest rates is strongly affected by the actions of the Fed, and sudden unpredictable moves would make them much riskier. Since this class includes systemically important stuff like mortgages, the Fed is forced to go slowly and predictably. So, while it may be true that from a pure inflation fighting perspective quick moves and rapid changes in direction would be more effective, from a financial stability perspective they are terrible.
Because of this, I don't think the Fed's tendency to repeat itself is some form of mental bias. It's very careful and deliberate policy, and arguably the correct policy.
The Fed does not only care about inflation. It also cares about the stability of the banking system, and the greater financial system as a whole. Sudden changes to interest rates can be extremely destabilizing to banks. Witness the bank failures as a result of the quite gradual interest rate hike recently, which gutted the value of long-term debt on their books.
Any long-term contract or instrument that has exposure to interest rates is strongly affected by the actions of the Fed, and sudden unpredictable moves would make them much riskier. Since this class includes systemically important stuff like mortgages, the Fed is forced to go slowly and predictably. So, while it may be true that from a pure inflation fighting perspective quick moves and rapid changes in direction would be more effective, from a financial stability perspective they are terrible.
Because of this, I don't think the Fed's tendency to repeat itself is some form of mental bias. It's very careful and deliberate policy, and arguably the correct policy.