The Fed projects slower growth and higher inflation. When I was a lad, that would have been a harbinger of “stagflation.” It may be time to relearn that word. #EconSky
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It's a difficult economic situation because traditional monetary policies designed to combat inflation (like raising interest rates) can worsen unemployment, while policies to boost economic growth (like lowering interest rates) can fuel inflation.
Is it good news that their inflation call is the less likely of the two? Stagflation requires a delicate mix of bad policy (which we are at a heightened risk for) but the more likely end point is a slowdown sufficient to offset the current mix of policy induced inflation.
Comments
It's a difficult economic situation because traditional monetary policies designed to combat inflation (like raising interest rates) can worsen unemployment, while policies to boost economic growth (like lowering interest rates) can fuel inflation.
The 1970s, baby!