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The other mandate of the Fed is getting full employment. Pumping money into the economy helps increase employment and there is a long way to go to get back to p
by habitue 5y ago
The other mandate of the Fed is getting full employment. Pumping money into the economy helps increase employment and there is a long way to go to get back to pre-pandemic levels on that metric.
They believed the inflation was transitory, and were going to wait it out. Now it's very clearly not transitory, so they are taking action
- lobocinza 5y agoIn the long run all is transitory. That being any action in a complex system can result in an unforeseen cascade of effects.
- mellavora 5y agoAh, the Phillips curve. I recommend you make some charts for yourself comparing US unemployment figures with CPI inflation and see if you can spot the curve. hint: https://www.hussmanfunds.com/wmc/wmc110404.htm https://www.hussmanfunds.com/wmc/wmc110404.htm spoiler: " there is in fact no strong "tradeoff" between unemployment and general price inflation, and almost certainly not an exploitable one. The Phillips Curve is essentially a statement that lower unemployment is associated with higher inflation in real wages. The strategy of accepting higher inflation in hopes of achieving lower unemployment (which is the basis of Bernanke's policy efforts) not only drops the phrase "real wages" but reverses the direction of cause and effect. " Also, it has clearly not been transitory for most of 2021. The "transitory" claim was backed partly by the pandemic, but relied on a 1-year lag. If, however, you used a 2-year lag (thus eliminating pandemic effects...
- habitue 5y agoI was just explaining what the Fed's public reasoning has been. I am not knowledgeable enough to comment on the correctness of the theory.