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It's a Long, Bumpy Road Back to 2% Inflation

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It's a Long, Bumpy Road Back to 2% Inflation

Bloomberg Opinion May 5, 2022
EconomicsOther

A Q&A with Dartmouth economist Andrew Levin about what it will take for the Fed to return the economy to “normal.”

The Federal Reserve has finally started to get real. It increased the policy rate target Wednesday by 50 basis points. More rate hikes are expected as the Fed tries to bring down inflation. But will this be enough? Technically, the Fed is still in accommodative mode; rates are so low they're helping make inflation worse. But if the Fed increases rates too much and too fast it risks a recession. Though it may need to create a recession to bring inflation back down. There are no easy choices.

In the second part of my conversation with Dartmouth economics professor and former Fed economist Andrew Levin, we discuss what the Fed is facing in the next few years, and what it needs to do to bring inflation back down. The conversation has been edited for length and clarity.

Continue reading the entire piece here at Bloomberg Opinion (paywall)

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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.

Photo by coldsnowstorm/iStock

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