If the US Federal Reserve wishes to avoid a return to stagflation, it must recognize the huge gulf between the level of real interest rates under former Fed Chair Paul Volcker and the current incumbent. It is delusional to think that today’s wildly accommodative monetary policy can solve the worst inflation problem in a generation.
NEW HAVEN – Poor Jerome Powell. With US inflation close to a 40-year high, the Federal Reserve chair knows what he needs to do. He has professed great admiration for Paul Volcker, his 1980s-era predecessor, as a role model. But, to paraphrase US Senator Lloyd Bentsen’s famous 1988 quip about his vice-presidential rival, Senator Dan Quayle, I knew Paul Volcker very well, and Powell is no Paul Volcker.
NEW HAVEN – Poor Jerome Powell. With US inflation close to a 40-year high, the Federal Reserve chair knows what he needs to do. He has professed great admiration for Paul Volcker, his 1980s-era predecessor, as a role model. But, to paraphrase US Senator Lloyd Bentsen’s famous 1988 quip about his vice-presidential rival, Senator Dan Quayle, I knew Paul Volcker very well, and Powell is no Paul Volcker.