AFMC - More Disinflation No Recession U.S. King Of The World

2024-01-25 00:10:00 ET

Summary

• Strong growth doesn't cause inflation, and reducing inflation doesn't require a recession. Inflation is the result of an imbalance in the supply and the demand for money.
• Bringing down inflation requires that the Fed address this imbalance, typically by increasing or reducing interest rates.
• If interest rates are too low, they will only stimulate inflation; if interest rates are too high, disinflation or deflation will be the result.

Both the Fed and most Fed watchers (especially those in the financial press) chronically misunderstand the relationship between economic growth and inflation.

Strong growth doesn't cause inflation, and reducing inflation doesn't require a recession. Inflation is the result of an imbalance in the supply and the demand for money....

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