Monetary Policy

By David Malpass – The Fed’s bond purchases make matters worse by enabling Washington’s fiscal irresponsibility.

The Federal Reserve’s monetary policy is broken. Normalization of interest rates has been needed for years to allow markets, not regulators, to allocate capital. But with interest rates at 5.5% and the dollar strong, the inflation battle must shift to the problem of government spending and regulation. The Fed’s silence on the fiscal and regulatory roots of this inflation crisis, and its insistence on using an antiquated inflation model that blames growth and jobs for price hikes, risks an even weaker U.S. economy. Read More

By Spencer Jakab – Say you added just 1 percentage point to the average interest rate in the CBO’s forecast …That would result in an additional $3.5 trillion in federal debt by 2033. The government’s annual interest bill alone would then be about $2 trillion. For perspective, individual income taxes are set to bring in only $2.5 trillion this year.

Compound interest has a way of quickly making a bad situation worse—the sort of vicious spiral that has caused investors to flee countries… Read More

By Judy Shelton – Now that the U.S. economy seems to be turning the corner on the worst inflation in 40 years, it’s important to remember that sound money and sound finances go hand in hand. While the Federal Reserve will continue to focus on reducing demand through restrictive interest rates, Congress should concentrate on expanding supply. Yet it all needs to be accomplished while also pursuing a balanced budget. Read More

By Judy Shelton – Welcome to the era of good-cop, bad-cop tactics from major government institutions. Fiscal and monetary policy are now working at odds to fight inflation. The Fed could crush demand by raising interest rates to stratospheric levels only to have a spendthrift White House and complicit Congress pump up consumer prices through fiscal measures that expand spending power—cash payments, subsidies, rebates, student loan forgiveness. Read More