Re:U.S. inflation rate rises to 13-year high of 5.4%
by dragonwriter on Wednesday October 13, 2021 @03:48PM
(#28856701)
> Its far more concerning to remember that the US Federal Reserve cannot combat this round of inflation using the prime interest rate, as it never fully abandoned QE or Quantitative Easing from 2008.
Not only can it, but more importantly it can fight it without interest rates by gradually unwinding the remaining QE (which it is likely to do, starting either next month or December, from current indications)
> since the corporate lending market is now saturated with low or no interest loans, any attempt to raise interest rates at all will likely trigger a massive recession
Well, no not “any attempt at all”, but its probably true that the effect of any interest rate hike on slowing the overall economy and demand will be greater than it otherwise would be, for any given size of rate hike.
But that's positive for ability to fight inflation with interest rates, as it means each quarter-point increase in the rate target will have more effect on slowing inflation than it otherwise would, and that fewer of them should be necessary, even before considering the effect of QE unwinding which will start before rate increases.
Not only can it, but more importantly it can fight it without interest rates by gradually unwinding the remaining QE (which it is likely to do, starting either next month or December, from current indications)
> since the corporate lending market is now saturated with low or no interest loans, any attempt to raise interest rates at all will likely trigger a massive recession
Well, no not “any attempt at all”, but its probably true that the effect of any interest rate hike on slowing the overall economy and demand will be greater than it otherwise would be, for any given size of rate hike.
But that's positive for ability to fight inflation with interest rates, as it means each quarter-point increase in the rate target will have more effect on slowing inflation than it otherwise would, and that fewer of them should be necessary, even before considering the effect of QE unwinding which will start before rate increases.