We still need to raise interest rates to curb the demand for houses and cars, in order to slow overall economic growth, and increases unemployment. That will in turn reduce demand across the economy, and potentially lower prices on household staples. And if raising rates doesn’t accomplish that it will at least impoverish people and make labor cheap again.
The Federal Reserve Board’s policy-setting Federal Open Market Committee, as expected, raised short-term interest rates another half-point. In the Fed’s official statement, there was no acknowledgment that inflationary pressures have been easing. Even the lower-than-expected increase in the Consumer Price Index, released yesterday, tempered neither the Fed’s action nor its rhetoric.
On the contrary, the Fed doubled down on its explicit commitment to bring inflation all the way down to 2 percent, a level that more and more economists consider unnecessary and unattainable except at grave costs to the real economy. But the statement flatly declared, “The Committee is strongly committed to returning inflation to its 2 percent objective.”