| The short answer is we don't know for certain. The long answer is that today's inflation doesn't seem to be monetary in cause, because nearly every country is experiencing inflation simultaneously. If the Fed had printed too much money and that was why the US was inflated, that dynamic shouldn't really affect, say, Germany, or Brazil. (Caveats abound, of course). Despite that, we're seeing nearly every major country have similar and sustained rates of inflation across monetary policy regimes. So, we know there's been something that affected everyone globally, and that's obviously supply chain disruptions along with gas and oil price changes due to Ukraine. Fed policy didn't cause the inflation, something bigger than the Fed did. The question then is can the Fed fix it. The answer here is maybe. The Fed has tools to fix inflation - when the inflation is caused by monetary policy reasons - and those tools should, all else held equal, reduce inflation eventually. The real question is whether or not the Fed is the best entity suited to tackling today's inflation. Politically, it's very easy to just delegate all that stuff to the Fed so that it becomes some technocratic thing that's essentially beyond the scope of normal politics. This is what Reagan did in the early 80s. But in terms of actually fixing the underlying problems, I don't know how much impact the Fed can have. Raising rates won't make supply chains readjust to today's geopolitical environment, or hire more truckers to move long-stored inventory. It will fix the monetary part of the inflation, but to get back to your question, nobody really knows what the monetary part is. It's less than we'd normally think, but we don't know precisely. |
Every country printed money during Covid.