Monday, January 17, 2022

If the Fed folks think raising the Federal Funds Rate will help control inflation, they are sadly mistaken . . . again

From 1983 through 2001, the Federal Funds Rate was aggressively high and averaged 6.27%, and the Consumer Price Index averaged 3.24%.*

From 2002 through 2020, the Consumer Price Index was much lower on average at 2.01%, as the Fed pursued an aggressive low interest rate policy, which averaged just 1.36%.

So, lower Federal Funds Rate, lower inflation, higher Federal Funds Rate, higher inflation, just the opposite of what the Fed says it intends.

But only a numbskull thinks these are correlated. The Fed is merely reactionary to complex existing phenomena, not pro-actively creating conditions.

 



 

 

 

 

 

 

 

 

 

* I used the average of the annual averages.