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If they really cared about their constituent banks, they wouldn't have raised interest rates at all. This all depends on how seriously you think they take the
by nickff 4y ago
If they really cared about their constituent banks, they wouldn't have raised interest rates at all.
This all depends on how seriously you think they take the inflation mandate, versus how much they care about their constituent banks and other political pressures. I happen to think that they really do care about inflation, as they know it is what will matter in the history books.
I think that the Governors underestimated the long-term impact of extremely low rates, and how they would magnify the impact of increased rates on (commercial and investment) bank balance sheets. They love historical analogies, and there isn't one for this (yet).
- taylodl 4y agoI agree. I suspect we're still tiptoeing around the 2008 crises and looking for that soft landing. There's is a balancing act for sure!
- MuffinFlavored 4y ago> they wouldn't have raised interest rates at all. would that have lead to a death spiral of hyperinflation (if they didn't try to destroy demand/suck liquidity out of the financial system)
- nickff 4y agoMaybe, but probably not hyper-inflation. Sustained, elevated inflation would be more likely.
- ThunderSizzle 4y agoSustained 10% year over year inflation is hyper inflation, which was a real possibility without any serious interest rate hikes and no change in fiscal policy from Congress.
- lamontcg 4y agohyperinflation is generally defined as over a 50% monthly inflation rate or more than a 12974.63% yearly inflation rate.