Federal Reserve interest rate hikes will not successfully cool inflation unless the federal government also slows fiscal spending, a new paper suggests.
Fed Chairman Jerome Powell, right, Lael Brainard, Fed vice chair, and John Williams, president and CEO of the Federal Reserve Bank of New York, at the Jackson Hole economic symposium in Moran, Wyoming, on Friday, Aug. 26, 2022.
In the span of just two years, Congress unleashed a torrent of federal money to shield the economy from the coronavirus pandemic, approving roughly $6 trillion in relief measures. Lawmakers approved about $2 trillion under President Biden and $4.1 trillion under former President Donald Trump, according to a COVIDpublished by the Committee for a Responsible Federal Budget, a nonpartisan organization based in Washington.
The paper suggests that as a result, the Fed can only reduce inflation once "public debt can be successfully stabilized by credible future fiscal plans." Without limitations on federal spending, rate hikes will only make the cost of servicing the $30 trillion national debt more expensive, pushing inflation higher.
Malaysia Latest News, Malaysia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Stocks post another loss as markets worry about higher ratesStocks deepened their late August skid with more losses Tuesday, as Wall Street grapples with the prospect that high interest rates are here to stay until the Federal Reserve brings inflation down.
Read more »
Bank of Korea Warns of More Market Volatility Ahead as Fed Signals More Rate HikesBank of Korea Governor Rhee Chang-yong says there’s a chance of increased volatility following more rate hikes from the Fed, according to a text message from the central bank
Read more »
New York Fed's Williams warns interest rates likely to stay high for a whileThe president of the New York Federal Reserve said on Tuesday that central bank policymakers must raise interest rates higher in order to combat the hottest inflation in decades.
Read more »
Fed's Williams Pushes Back on Market Expectations of a Rate Cut Next YearNew York Fed President John Williams said he expects rates to continue higher and to remain at those levels until inflation is subdued.
Read more »
`Exponentially powerful' fear of losing grip on inflation expectations is driving Fed's need to keep hiking ratesFear that U.S. inflation expectations are on the brink of coming unanchored is having an “exponentially powerful” impact on Federal Reserve policy makers and driving their urge to preempt such a scenario with higher interest rates.
Read more »