CNBC: Raising interest rates is the wrong solution

[tsptalk]

Raising interest rates is the wrong solution to the inflation problem, analyst says

Raising interest rates to tame demand and therefore inflation is not the right solution as high prices have been mainly driven mainly by supply chain shocks, MBMG Group managing partner Paul Gambles told CNBC.

“Supply is very difficult to manage, we are finding across a whole bunch of industries, a whole bunch of businesses, they’re having very different challenges just turning the taps back on,” he said.

“And the Fed are the first ones to put up their hands and say monetary policy can’t do anything about supply shock. And then they go and raise interest rates,” he added.

https://www.cnbc.com/2022/07/05/hik...ng-solution-to-inflation-problem-analyst.html

 

[Boghie]

The FED has raised rates by 1.50%
The FED is not the problem

The FED probably should have been raising interest rates over the past two years. I really don't think they expected the Gubmint to hand out another $3 Trillion dollars. The FED has NO CHOICE but to pull the stuff they plowed into the economy PLUS the 3 Trillion dollars the Treasury plowed into the economy. That 3 Trillion dollars of free money - especially the latter bread and circus funding - is making their job much harder. And, on top of it our gubmint policies are dumping economic activity while accelerating inflation.

This will NOT be a 'soft landing'. It will be a landing - of that we can be sure. Remember, the FED is not part of the Federal government. Powell may not want to be the guy known to drive an economy into recession, but he will prefer that to being an idiot who reigned over the FED while the money supply went into hyper-inflation. Nobody wants to be that idiot.