Inflation as a Fiscal Limit
A paper released at the same Jackson Hole, Wyoming, summit where Fed Chair Jerome Powell recently spoke makes the case that federal government spending needs to come down in order that Federal Reserve policy can do its job in bringing down our current high inflation.
The central bank can’t do the job itself and could even make the matters worse with rate hikes.
The paper's conclusion about the impacts of the current fiscal policies on inflation:
they ... contributed to the surge in fiscal inflation. Increasing rates, by itself,
would not have prevented the recent surge in inflation, given that a large part of the increase was due to a change in the perceived policy mix. In fact, increasing rates without the appropriate fiscal backing could
result in fiscal stagflation.
Where will Biden Administration and the Democratic congress cut spending? Does anyone know of any pending legislation proposing such cuts? I'd love to read it.
The link to the paper is here:
https://www.kansascityfed.org/Jackson%20Hole/documents/9037/JH_Paper_Bianchi.pdf
The central bank can’t do the job itself and could even make the matters worse with rate hikes.
The paper's conclusion about the impacts of the current fiscal policies on inflation:
they ... contributed to the surge in fiscal inflation. Increasing rates, by itself,
would not have prevented the recent surge in inflation, given that a large part of the increase was due to a change in the perceived policy mix. In fact, increasing rates without the appropriate fiscal backing could
result in fiscal stagflation.
Where will Biden Administration and the Democratic congress cut spending? Does anyone know of any pending legislation proposing such cuts? I'd love to read it.
The link to the paper is here:
https://www.kansascityfed.org/Jackson%20Hole/documents/9037/JH_Paper_Bianchi.pdf
56-60, F
