Why the Fed can’t stop prices from going up anytime soon – but may have more luck over the long term
The ConversationDec 22, 2021
The Facts
The Federal Reserve announced on Wed. that it will raise its benchmark federal-funds rate by a quarter-percentage point, the first rate increase since Dec. 2018.
The committee also tentatively scheduled increases at each of the six remaining meetings this year, pointing to a rate of 1.9% by the year's end, and three more hikes in 2023.
The Spin
Republican narrative
Soaring inflation was the predictable outcome of Biden's big government legislative agenda and reckless spending on things like the American Rescue Plan. In addition, anti-energy policies, such as shutting down the Keystone XL pipeline and limiting offshore drilling, have added to the high energy costs. To fight inflation, the government should cut regulations and end its anti-energy policies.
Democratic narrative
Putin's decision to invade Ukraine has boosted inflation worldwide by pushing gas and energy prices up, and this has nothing to do with Biden. Prices might get higher during this year but it's temporary and inflation will cool down by the end of the year as supply chains recover from the COVID disruptions.
