I'd say that in a properly working economy, when high inflation is present, rates should be moving up to slow down things and ensure a smooth continuous landing and maintain healthy GDP growth.
But current high inflation is not caused by an overheating economy but rather due to shortages, trade, manufacturing imbalances and of course so much Feds $$$ help thrown at markets (QE, Infras, Covid compensation, debt ($$$ deficit). We also have insane stock valuations due for a correction except commodities.
So reducing QE/increasing Feds rates will perhaps fight inflation but since we do not have an overheating economy, it will have a dramatic effect on the said fragile economy, making things worse maybe. Hope not. But options are limited for Governments and central banks. Doomed if you do, doomed if you don't.
I am no economist so pls take my opinion for a grain salt but this is how I see things. |
