Post #3602 by WendyBG on the Macroeconomic Trends and Risks board

Personal Finance Topics / Macroeconomic Trends and Risks

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AdrianC wrote, "If inflation is rising due to higher oil prices, not due to an overheated economy, then cutting rates could be the right move, perhaps?"

Higher oil prices might lead to stagflation as happened in the 1970s. Then the Fed is caught between a rock and a hard place. The experience in the 1970s was that lower interest rates led to higher inflation...until Fed Chair Volcker came in and dramatically raised the fed funds rate.

Every Fed governor knows this. They know their names will be studied in economics classes for decades to come.

Wendy

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