Inflation is not a new phenomenon for the U.S. economy. Although the Federal Reserve has sustained a higher-for-longer inflation environment, historical outcomes provide valuable insights. Brookings Institution Director of Economic Studies Ben Harris joins Wealth! to talk economic history.
Harris draws parallels to the 1970s and early 1980s, when "inflation lasted for roughly a decade." During that time, inflation reached a staggering 14%, he says, whereas inflation peaked at 9% most recently. While Harris acknowledges that though the current experience "wasn't as severe, some of the lessons were the same."
Harris emphasizes that monetary policy is the primary tool for combating inflation, stating that the Fed will "keep interest rates at what it deems to be an appropriate level until it has brought inflation down to around 2%." However, he notes a crucial difference: consumers today "believe in the Fed's credibility," which can influence behavior "in problematic ways."
As far as inflationary efforts go, Harris states, "We're now in sort of the last mile." He suggests that the big question now is, "How many additional high rates do we have to go through in order to get inflation down to 2%?"
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30 май 2024
