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You can't do that though because at a certain point inflation expectations become inbuilt and then people want to get paid more, spend more now rather than save
by technotony 4y ago
You can't do that though because at a certain point inflation expectations become inbuilt and then people want to get paid more, spend more now rather than save (expecting higher prices next year) etc etc. This makes those inflation expectations self-fulfilling. The fed really needs to be aggressive enough to affect those expectations.
- starkd 4y agoOnce inflation gets out of the bottle, it's very difficult to get back in.
- RealityVoid 4y agoWhy is that? The FED obviously has levers that it can push to lower inflation. Currently, the levers are kind in a tricky place. But if they let inflation run its course now, and then push the levers later, wouldn't it be effective?
- erichocean 4y ago> if they let inflation run its course What other posters are telling you is that there's no such thing as letting inflation "run its course." What actually happens is that high inflation becomes baked into the normal operation of the economy, at which point it is extremely difficult to get rid of (i.e. not just raising interest rates above the inflation rate).
- orwin 4y agoThis isn't true at all. Look at french inflation figure during the post-war boom. We have lower inflation right now than back then.