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by stephen_g
1186 days ago
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Raising rates never really reduced inflation anyway… In the 70s Volcker shock, when the oil crisis eased the inflation came down of its own accord, and would have with or without the rate hikes (and the money supply was expanding when the inflation started coming down, which was the exact opposite of their theory - they were trying to reduce the money supply with their rate rises, which they thought would reduce inflation, but they were never able to hit their money supply targets anyway). The Volcker era should be remembered as nothing but a failure. We saw this problem at the opposite end too - central banks around the world were trying for more than a decade to stimulate economies by dropping rates, many even to the point of taking them negative - and inflation remained stubbornly below the target… So dropping rates hasn’t worked to stimulate, raising rates hasn’t worked to slow inflation… Why persist with the charade that adjusting rates is an effective policy? |
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the US central bank has a dual mandate, price stability and close to full employment. having just one it could be much more aggressive.