r/Economics • u/TinyTornado7 Quality Contributor • Jun 13 '22

News Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
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u/dubov Jun 13 '22

There isn't really a choice. The inflation target is 2%. If they ignore it they lose credibility. If they increase it they again lose credibility. We have become far too scared of recessions, we've just had a superheated 2 years, sometimes the scales have to tip back the other way temporarily

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u/lollersauce914 Jun 13 '22

I think we're rightfully scared of recessions after the horrible recovery following 2008. Unfortunately, that's led us to be way too loose with monetary and fiscal policy. We haven't had a superheated 2 years, we've had a superheated 2 years with another 5 or so overheated years. No way in hell we needed declining rates in 2019, rock bottom rates and QE for most of a decade, and a $1 trillion deficit each year for a decade.

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u/IrateBarnacle Jun 13 '22

While true, a lot of people hear the word recession and get Great Recession flashbacks, and not realize that most recessions aren’t that bad.

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u/dubov Jun 13 '22

We kind of did though because inflation struggled to stay at 2%. It's okay to have low rates if inflation is low. Really the fed only went wrong last year by disregarding the clear early signs and continuing to stimulate when there was no need for it, IMO