Fed’s Policy Paradox: Too-Slow Growth Threatens Inflation Fight

From bnnbloomberg.ca

Faced with only limited signs of a slowdown in US demand despite more than five percentage points of interest-rate hikes, logic would say the Federal Reserve needs to do more. But policymakers and Fed watchers are now giving more attention to a new line of argument, that central banks need to take account of what their actions mean for the supply side of the economy. The implication: Too-high rates could actually undermine the inflation fight, by squelching the benefits of increasing supply — which are just now coming on stream. It’s a cornerstone of macroeconomic theory that monetary policy works mostly on ... (full story)