Monetary and Inflationary Traps
Having adopted a more flexible policy framework in response to the low-inflation conditions that preceded the COVID-19 crisis, the US Federal Reserve now finds itself confronting an entirely different economic regime. The balance of forces is thus weighing heavily against decisive action to control today’s price increases.
CHICAGO – Price increases in the United States are spreading across goods and services, and inflation also can be seen in broad-based business inputs such as transportation, energy, and increasingly labor. How should we expect central bankers to react?