Us fed reserve chair jerome powell fighting inflation like 1980s volcker style
US Federal Reserve chair Jerome Powell's statement last Friday at the annual central bankers' conference at Jackson Hole in Wyoming that the US economy will need high interest rates for some more time draws on the experience of Paul Volcker in the 1980s when a single misstep - Volcker cut rates on initial signs of easing inflation - led to an extended spell of painful monetary tightening. Powell's hawkishness is fed by that history of entrenched inflation, although Volcker did eventually bring prices to heel.Powell's position that the Fed will have to keep at it - and the economy will have to grow below trend for a while - also reverses his own misstep in assessing the nature of the current spell of inflation. The Fed's narrative is changing after its foresight and response have come under question.
Aggressive central bankers may find their armoury to battle inflation inadequate unless governments start tightening budgets. Inflationary pressure could, in fact, build if quantitative tightening is not accompanied by a restoration of the fiscal balance. The US budget deficit is at a historical high and raising interest rates could feed into inflation as the economy cools down. This dilutes criticism over the Fed's delayed policy response, which may have been counterproductive during fiscalexpansion - the effects of tight monetary and loose fiscal positions are more pronounced on growth than on inflation. The Joe Biden administration may have to squeeze spending faster to avert stagflation.
Stay updated with The Hindu Editorial Vocab24 app, your definitive source for breaking news and comprehensive coverage from India and around the globe. Whether it's political developments, business updates, sports highlights, the latest technology trends, or current events, The Hindu brings live, accurate, and reliable news directly to your device.
Don’t fall for sensationalized or fake news shared online. Read and share accurate updates with friends and family through The Hindu Editorial Vocab24 app. Download it today!
News Coverage in The Hindu Editorial Vocab24 App
Breaking News: Receive instant notifications on breaking news stories as they unfold. Stay informed about major events and developments in India and around the world with live blogs, news in shorts videos, and concise articles.
Politics: Get the latest updates on Indian politics, including elections, policy changes, government decisions, and political events that shape the nation.
Business and Economy: Stay ahead in the economic landscape with detailed business news and market analysis. Learn about stock market trends, financial reports, corporate news, and economic developments to make informed investment decisions.
Current Events: Follow stories on social issues, policy changes, global events, and daily current affairs, tailored for UPSC and other competitive exam preparations.
Technology: Keep up with the latest gadgets, innovations, and tech trends. Read expert reviews and analyses in short, concise updates on cutting-edge technology from India and beyond.
Sports: Never miss a moment of your favorite sports. Get live scores, match reports, and expert analysis on cricket, football, tennis, and more.
International News: Stay informed about global events and geopolitical developments, including the Russia-Ukraine war, Israel-Palestine conflict, and other key international stories.
Local News: Stay connected to your community with the latest updates on city events, issues, and local news. Coverage includes hyperlocal updates from cities like Bangalore, Chennai, Delhi, Hyderabad, Mumbai, Kolkata, and more.
Trending Topics: Discover what's trending today with the most talked-about stories and hot topics across India and the world.
Experience journalism that values integrity, accuracy, and reliability. Download The Hindu Editorial Vocab24 app today and stay connected with the world.
Subscribe to our newsletter!
