A Balanced Response to Inflation
Although it is anyone's guess what will happen next with inflation, the data show that there is no reason to react rashly with large across-the-board interest-rate hikes. The economy is working through an unprecedented transition that could ultimately be a boon for workers; but only if policymakers let the process play out.
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NEW YORK – Although some supply shortages were anticipated as the global economy reopened after the COVID-19 lockdowns, they have proved more pervasive, and less transitory, than had been hoped. In a market economy that is governed at least in part by the laws of supply and demand, one expects shortages to be reflected in prices. And when individual price increases are lumped together, we call that inflation, which is now at levels not seen for many years.