Hello,
I’d like to ask you what inflation rate is still acceptable for FED? I mean when they decide that it’s a time artificially to increase interest rate and stop inflation? What sign FED gets?
Thank you in advance.
they check sheep’s entrails
many individuals like to complain that the official inflation rate(CPI) excludes too many things,and because of this inflation is really higher then the official rate. Those individual who suggest such a thing also need to be aware that official unemployment rate is not as accurate as U6. prices tend to drop whenever there is an increase in the unemployment rate,and because of this those who are fear mongering over inflation should also check out the unemployment rate.
Generally, the Fed’s job is impossible from this context.
There is no way to know what the “correct” price inflation/deflation rate is. These things are set by supply and demand in an incalculable number of goods and transactions.
The Fed can’t set interest rates, either. It can only change portions of the money supply to attempt to acheive goals, most specifically the inter-bank, short-term loan rate. If it actively tries to suck money out of circulation, you’ll get lots of bank failures. If it pumps in too much money, you’ll get a business cycle.
Thus, a healthy credit market without cyclic activity would most likely indicate the Fed has pursued a wise long-term policy, which I believe would be a virtually static money supply. 0% inflation (we use the definition of monetary inflation) would be the optimal policy, with interest rates and prices set completely by the market.
And the CPI, pure and simple, cannot accurately measure price inflation. Comparing last year’s products to this year’s means nothing because the products and business environments are not homogeneous.
-100%.
i dont see how austrians are fear mongering over inflation, the massive increase in the monetary base is sufficient to warrant fear of inflation(the fed is well aware of this risk, they just think they can beat it when it comes around). inflation is genuinely destructive and hurts the poorest citizens the most(those on fixed wages or retirement savings). i dont see where unemplyment fits into this either, unless youre trying to throw in the phillips curve here. many austrians are well aware of the state’s manipulation of statistics, and blame much of the unemployment on government intervention(minimum wage, licensing boards, business cycles, etc.).
Ixtellor?
Where is our resident Keynesian when you need him … ?