Id even say that it’s going to be pretty hard to control inflation. Imho, it seems the primary reason why we have high inflation has a lot more to do with covid + Ukraine war and as a result, the global economy that historically kept prices for good and services lower, is now broken…. The global supply chain was already pretty wacked from covid… Now, we have an even worse supply chain issue from also energy disruptions due to ukraine.
Monetary policy I don’t think will fix that problem and monetary policy wasn’t the original source of high inflation imho. It was the supply chain issue that first happened due to covid and then exacerbated by the ukraine war with now a supply chain issue with energy…
In fact, imho I think by tightening the money supply it’s going to make things a lot worse.
Because while tightening the money supply might shrink and reign in the US economy, I still think we will have persistent higher levels of inflation so long as the global supply chain is wacked and the war persists that wacks the energy supply chain too because simply put those factories and energy supplies aren’t meeting demand due to constraints on the producer side. And so long as supply remains constrained, higher demand side is going to keep prices high.
Take a look at the semiconductor companies for instance. Their earnings could have been better. Its not like there isn’t enough demand for chips, like TSM.. It’s because they can’t produce fast enough, partly due to the broken supply chain and shutdowns. Seems like it would take a lot to cool off that demand.
