Inflation has been in the cross-hair of late. Talks of recession and stocks losing its steam have people concerned. So much so, the Fed (the Federal Reserve) is trying to fight the inflation by raising interest rate. Which has a domino effect on other things, by design.
Noticeably are the rising mortgage rate, rent, grocery items and costs of other goods and services, on the expense side of the ledger. Nothing on the income side, as far as I could tell. Hence the complaint about the inflation erodes our buying power as the price on everything is getting more expensive.
Economist, I am not. But this much I do know: not all inflation are bad. Moderate inflation (2-3%) helps to stimulate the economy to grow, home value going up. Etc. That is why the Fed aims a 2% rise as its target. Only when the inflation is excessive or hyper-inflation makes people’s life miserable.
As much as the Fed tries to control the inflation, it is only one leg of the three-legged stool. The Fed can’t do it without the other two legs. Which are the law of supply and demand and consumer future expectations. Given the lasting impacts of Ukraine war and Covid pandemic, the odds is not in the Fed’s favor.
Do you think the Fed will succeed in cooling down the inflation?