We had immaculate disinflation in 2022-24, from around 7.5% down to 3%. There wasn't much fiscal restraint other than the unwinding of the Covid programs, but the Fed reduced the size of its balance sheet by around 20%.
"So how to lower expectations? Standard monetary economics prescribes a durable precommitment to action, not just words. Fed Chair Kevin Warsh is doing a good job of persuading Fed-watchers that he really is an inflation hawk. That helps. But is it enough? Inflation is still rising though perhaps less than it might be otherwise."
Correct me if I'm wrong, but isn't Warsh anti-precommitment?
Many years ago when interest rates were running >10% the WSJ devoted a lot of ink to "crowding out". An interesting concept where as rates rise only government, being essentially price insensitive, could justify borrowing and therefore keeping rates high. If you are a Socialist this must be an extremely attractive outcome as you choke off private enterprise and move the economy to government. Is this still a thing? Still a risk?
We had immaculate disinflation in 2022-24, from around 7.5% down to 3%. There wasn't much fiscal restraint other than the unwinding of the Covid programs, but the Fed reduced the size of its balance sheet by around 20%.
"So how to lower expectations? Standard monetary economics prescribes a durable precommitment to action, not just words. Fed Chair Kevin Warsh is doing a good job of persuading Fed-watchers that he really is an inflation hawk. That helps. But is it enough? Inflation is still rising though perhaps less than it might be otherwise."
Correct me if I'm wrong, but isn't Warsh anti-precommitment?
Many years ago when interest rates were running >10% the WSJ devoted a lot of ink to "crowding out". An interesting concept where as rates rise only government, being essentially price insensitive, could justify borrowing and therefore keeping rates high. If you are a Socialist this must be an extremely attractive outcome as you choke off private enterprise and move the economy to government. Is this still a thing? Still a risk?
Inflation is production driven and the Fed should not raise rates!