The usual way to rein in inflation is to raise rates above their neutral level
—thought to be about 2-3%—by more than the rise in underlying inflation. That points to a federal-funds rate of 5-6%, unseen since 2007.
Rates that high would tame rising prices—but by engineering a recession.
Does the Fed have the stomach to inflict such economic pain?
Many economists advocate higher inflation There is nothing special about 2%, except the fact that the Fed has promised it in the past.
Editorial The Economist 23 April 2022
Powell wants to get closer to neutral. But what’s that?
Think between 5% and 6%
MarketWatch 3 May 2022
Fed Officials’ plans for their $9 trillion asset portfolio
reflect many similarities—and differences—from earlier experiment to shrink holdings
In 2017, when the Fed concluded the stimulus was no longer needed, it began to shrink its portfolio passively—that is, by allowing bonds to mature without reinvesting the proceeds, rather than actively selling them in the open market.
WSJ 1 May 2022
https://www.wsj.com/articles/fed-prepares-double-barreled-tightening-with-bond-runoff-11651397402
Riktiga karlar är inte rädda för lite inflation
https://englundmacro.blogspot.com/2021/07/us-inflation-today-is-much-more-like.html
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