Tag
We don’t know. But the Taylor principle says rates should increase at least to the level of annual inflation to control rising prices.
There’s a “long and variable lag” between monetary policy starting to control inflation and inflation responding in a substantial way.
Getting demand to soften is the point because that’s expected to help tame inflation.
Selling the Treasury and mortgage-back bonds on its balance sheet helps the central bank raise interest rates.
As inflation hits 40-year highs on several key metrics, not all economists agree on the causes.
Companies facing few competitors can hike prices more easily than those in competitive markets.
The Fed’s tools can only go so far. “All of this activity relies on the other institution at the end of the transaction,” said economics professor Nina Eichacker.
Bringing the economy in for a “soft landing” — taming inflation without bringing on a recession — has proven difficult for the Fed in the past.
Fed chief Powell called the risk of a recession “not particularly elevated.” But some economists think he’s overly optimistic.
Citing high inflation and the tight labor market, Fed Chair Jerome Powell announces the first rate hike since 2018.
