The Misguided Notion That the Fed Must ‘Fight Inflation’

As John Tamny explains in this column, we should scoff at the idea. He writes, “The notion implies that without the Fed’s responsible ways, the alleged inflation crisis would spiral out of control. Such a view is obnoxious, and that’s being gracious. Governments cause inflation. Always. In the market-driven world of lending, the response to actual inflation is always going to be swift, and for obvious reasons. No one wants to lend out more than they get back, from which in a natural free market rates of interest would naturally rise as compensation for any devaluation. It’s a long or short way of saying that Fed fiddling with short-term rates to slay inflation is the ultimate non sequitur.”

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