Wall Street loved the Federal Reserve’s quarter-point rate hike on Wednesday, 500 points up in the news. This is a clear signal that Fed Chair Jerome Powell is not doing enough to fight inflation.
Yes, it was the first increase since 2018, but inflation is now at a four-decade high of at least 8% and will certainly rise further (likely over 10 %). US fossil fuel production, which has been a key driver of rising costs since the day he took office.
Crucially, the national debt has risen by $3 trillion since the outbreak of COVID, initially to fund bipartisan relief and stimulus measures as the pandemic shut down the economy — but then just weeks later, by $2 trillion into purely partisan (and highly inflationary) Democratic wish-list programs Biden took office.
And Powell and his merry band agreed increase the money supply more than 30%, which guarantees big price hikes as insane amounts of dollars chase available goods. And even as inflation began to hit hard earlier this year, he joined the White House in the gleeful talk that it was only temporary.
Now America is headed back to the 1970’s when the workforce demanded large wage increases to cover bite inflation, which is being deducted from paychecks, raising the cost for employers to ask for more; rinse and repeat.
Breaking this cycle requires a serious shock – not a few carefully spaced quarter-point raises. If the markets aren’t screaming about a rate hike, it’s not enough.
And tackling the root cause of carcinogenic monetary growth requires a vocal and credible commitment to reducing the Fed’s own balance sheet, which was too large even pre-COVID, as Powell never fully unwound positions previously taken during the crisis thatthe 2008 mortgage meltdown.
Of course, it would help if President Biden signaled clear support for the Fed going hard. He should, with inflation hitting low-income workers by far the hardest, the Prez insists he takes care of it. But it is the Fed chair’s duty to act one way or the other.
The longer the Fed waits, the more bitter the medicine Powell or any successor will have to take.
https://nypost.com/2022/03/16/the-fed-needs-to-get-a-lot-tougher-to-stop-soaring-inflation/ The Fed needs to work much harder to stop rising inflation