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Why would they intervene? Increased inflation was one of the reasons for passing so much stimulus. Several years of 3-5% inflation means the government's debt
by zozin 5y ago
Why would they intervene? Increased inflation was one of the reasons for passing so much stimulus. Several years of 3-5% inflation means the government's debt is 20-25% smaller relatively speaking. The Fed has been trying to get to 2% for nearly a decade and they're on the record saying that +2% inflation (read 3-5%) is okay by them for an extended period of time since that would make up for the lack of inflation during the 2010s.
- Jeema101 5y agoBecause if banks have underwritten fixed-rate mortgages to people at 3% APR and inflation goes above 3%, then banks begin to lose money. Nobody wants banks to become insolvent.
- imtringued 5y agoThe Fed's job is hitting 2% inflation because that is basically what a healthy economy needs over the long term. The Fed has no obligation to help the US government shrink its debts. Inflation is caused by demand exceeding supply. 2% inflation means demand is exceeding supply by exactly 2% and that is a good thing because it means there is wiggle room for people to find jobs, there is wiggle room to let the economy shift from one industry to another, it means there is demand for technology that increases productivity.