The inflation dilemma: Wait it out, or cause a recession

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The inflation dilemma: Wait it out, or cause a recession
France Dernières Nouvelles,France Actualités
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Want to bring down inflation? The great dilemma is this: The only real options are to be patient, or cause a recession.

It is a pick-your-poison environment for the Biden administration and the Federal Reserve, who face public discontent over economic conditions — and the risk that discontent would only get worse if the alternative was a new recession.

But the measures that would be needed to bring inflation down more rapidly would risk sending the economy into a tailspin.In the decades after World War II, episodes of inflation have ended when the Fed took steps to tighten the money supply, causing recessions. In the most extreme example, Fed Chair Paul Volcker engineered a steep downturn in the early 1980s that ended the double-digit inflation of that era — but at the cost of double-digit unemployment that pummeled President Reagan's popularity.the goal is a soft landing. The Fed is looking to move toward higher interest rates gradually, not with the kind of shock Volcker engineered.

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