You may have noticed that filling up your car, going to the hairdresser and shopping for groceries have become more expensive lately. While some things are cheaper than a year ago, overall we are paying more for what we buy. This is what we call inflation.
After years of very low inflation, in August, September and October 2021 inflation hit its highest level in 13 years. This is happening for three main reasons: our economy is reopening fast, higher energy prices are pushing up inflation, and something that statisticians call the “base effect”.
How about raising interest rates? It’s been basically zero for more than a decade. And these central bankers have surprised Pikachu faces.
Ugh, this is how virologists must feel when they read a thread about viruses.
Interest rate changes have proven to be borderline useless in altering inflation which is why nowadays central banks mostly rely on more straight-forward measures such as QE. So raising interest rates will barely do the trick, let alone it’s not what CBs want as retracting expansive monetary measures too soon has proven to be fatal after the financial crisis – primarily Eurozone countries had a very slow recovery throughout the 2010’s due to the ECB going back to “no crisis mode” too soon.
This is why this time around both the Fed and the ECB decided from the get-go to pursue a prolongued strategy, putting up with a prolongued period of inflation at the benefit of a faster recovering economy than after the financial crisis.
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You may have noticed that filling up your car, going to the hairdresser and shopping for groceries have become more expensive lately. While some things are cheaper than a year ago, overall we are paying more for what we buy. This is what we call inflation.
After years of very low inflation, in August, September and October 2021 inflation hit its highest level in 13 years. This is happening for three main reasons: our economy is reopening fast, higher energy prices are pushing up inflation, and something that statisticians call the “base effect”.
[deleted]
Me sitting on my gold stash: 🙂
https://goldprice.org
How about raising interest rates? It’s been basically zero for more than a decade. And these central bankers have surprised Pikachu faces.
Ugh, this is how virologists must feel when they read a thread about viruses.
Interest rate changes have proven to be borderline useless in altering inflation which is why nowadays central banks mostly rely on more straight-forward measures such as QE. So raising interest rates will barely do the trick, let alone it’s not what CBs want as retracting expansive monetary measures too soon has proven to be fatal after the financial crisis – primarily Eurozone countries had a very slow recovery throughout the 2010’s due to the ECB going back to “no crisis mode” too soon.
This is why this time around both the Fed and the ECB decided from the get-go to pursue a prolongued strategy, putting up with a prolongued period of inflation at the benefit of a faster recovering economy than after the financial crisis.