It’s Not Your Imagination, Inflation Is Still Too High
- Fed's policy tools not effectively tackling inflation's root causes
- Concerns over Fed's balance sheet and debt monetization fueling inflation
- Administration's policies like tariffs and spending contributing to high inflation
It’s Not Your Imagination, Inflation Is Still Too High
Is the Federal Reserve’s recent actions doing more harm than good? Tony Katz is joined by economist Dr. Matt Will to discuss the latest inflation numbers and the potential implications for the economy.
The Consumer Price Index (CPI) report showed a 0.5% increase, which might seem alarming at first glance. However, when looking at the core CPI, which excludes high gas prices, the number drops to 0.2%. This has led to a mixed reaction from the market, with some people feeling optimistic and others worried.
“I think we’re in a scary zone,” Dr. Will said, referring to the current inflation levels. “This is where the Fed took dramatic action three years ago, and it’s still a concern.” Despite the core CPI being within the Fed’s target rate, Dr. Will notes that it’s still too high and hasn’t come down from last month.
The conversation turned to the Federal Reserve’s policy and its potential impact on the economy. Dr. Will explained that the Fed has three tools in its toolbox: reserve requirements, interest rates, and federal open market operations. However, he pointed out that the Fed hasn’t been using the reserve requirements tool, which involves requiring banks to hold a certain percentage of their deposits in reserve.
“The Fed is the one who creates cash,” Dr. Will said. “They can increase or decrease the amount of cash in the economy by changing interest rates or buying and selling assets on their balance sheet.” Dr. Will believes that the Fed’s current policy is not addressing the root cause of inflation and is instead just treating the symptoms.
The discussion also touched on the topic of the Federal Reserve’s balance sheet and its potential impact on the economy. Dr. Will argued that the Fed’s decision to buy and hold assets, such as mortgages and treasuries, is not a good idea and can lead to inflation.
“We don’t want our government owning our mortgage,” Dr. Will said. “We don’t want them owning Intel or any other company. It’s a bad idea.” Dr. Will also expressed concerns about the Fed’s decision to monetize the national debt, which he believes can lead to inflation.
The conversation also delved into the topic of the current administration’s policies and their impact on the economy. Dr. Will argued that the administration’s policies, such as massive government spending and tariffs, are causing inflation and hurting the economy.
“The tariffs are a drag on the economy,” Dr. Will said. “If he would remove the tariffs, he would grow the economy even more.” Dr. Will believes that the administration’s good policies, such as regulatory reform and tax policy, are being overshadowed by its bad policies.
As the conversation came to a close, Dr. Will emphasized the importance of understanding the root cause of inflation and addressing it rather than just treating the symptoms. He also encouraged listeners to think critically about the current economic situation and not to be swayed by short-term market fluctuations.
To hear more of this insightful conversation and learn more about the current economic situation, be sure to listen to the full episode of this podcast.
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