1 year ago
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Two stories today from The New York Times once again focus on inflation and the Federal Reserve's determination to stamp it out. The Personal Consumption Expenditures index is still climbing, reports one, "reflecting the difficult path ahead for economic policymakers as they weigh whether to raise interest rates again to bring down stubborn price increases."
Consumer Spending on the Rise, announces the other: "Americans’ income and spending both rose in April, a sign of economic resilience amid rising prices and warnings of a possible recession."
American consumers are spending more money than before when they go to the grocery store or make other purchases, worries the Fed. That's inflationary, and the traditional way central banks deal with inflation is to declare that Too Many People Have Jobs These Days, requiring policymakers to find those people and swing an official Policy Bat at their kneecaps.
The easiest way to do that is to raise interest rates to tamp down new large-scale business investments and expansions, weakening the job markets and making Americans, on average, poorer than before. All of this presumes that the inflationary pressure is indeed that Americans simply have too much money for their own good. But what if it's not that? What if the inflationary pressure is coming from profit-taking price hikes in increasingly monopolistic market sectors?
