The Fed’s solution might be worse than the problem
- It is more plausible to argue that inflation in the US, as elsewhere in the world, is being driven by supply-demand imbalances.
The Federal Reserve System, the central bank of the US, has increased its benchmark interest rate, from near zero in mid-March 2022 to 3-3.25% in late-September 2022, in five hikes over the past six months, and projections place it in the range of 4.5% by end-2022. This rate is a benchmark for every other interest rate in the US economy, from borrowing rates for mortgages to business loans. It also influences, often determines, many other interest rates across the world.