The problem is that there's not exactly a wealth of evidence showing that the rate hikes are even bringing down inflation, and even if we use Volcker's model from the late 70s and early 80s, for the rate hike approach to work the federal funds rate has to be above the rate of inflation, which was where Volcker quickly put the FF rate in 1979.
Initially Volcker failed to sustain the FF rate, allowing it to fall back below the rate of inflation in 1980. But afterwards he doubled down and pushed the FF rate above inflation,
Powell has been hiking rates since March, and the inflation rate has pulled FARTHER away from both the 10-year treasury yield and the FF rate.
That means the best case scenario for Powell's rate hikes is that they aren't doing much of anything, that they're impotent, meaningless gestures. A more likely case is that they are doing more to hurt employment than they are hurting inflation.
If the rate hikes are not doing anything, or are doing only very little, to combat inflation, then doing them just for the sake of doing "something" is the worst sort of virtue signalling imaginable.
If the rate hikes are not helping, we shouldn't be doing them.
I agree that interest rates should be above the rate of inflation. I also realize that this will cause much pain, but I believe it's preferable to letting inflation spiral completely out of control and destroying what little value our currency has left.
"Powell’s hawkish stance on interest rates is about to cause significant job destruction"
Indeed, it is. But I can think of no alternative, can you?
The problem is that there's not exactly a wealth of evidence showing that the rate hikes are even bringing down inflation, and even if we use Volcker's model from the late 70s and early 80s, for the rate hike approach to work the federal funds rate has to be above the rate of inflation, which was where Volcker quickly put the FF rate in 1979.
https://fred.stlouisfed.org/graph/?g=Tngb
Initially Volcker failed to sustain the FF rate, allowing it to fall back below the rate of inflation in 1980. But afterwards he doubled down and pushed the FF rate above inflation,
Powell has been hiking rates since March, and the inflation rate has pulled FARTHER away from both the 10-year treasury yield and the FF rate.
https://fred.stlouisfed.org/graph/?g=Tngs
That means the best case scenario for Powell's rate hikes is that they aren't doing much of anything, that they're impotent, meaningless gestures. A more likely case is that they are doing more to hurt employment than they are hurting inflation.
If the rate hikes are not doing anything, or are doing only very little, to combat inflation, then doing them just for the sake of doing "something" is the worst sort of virtue signalling imaginable.
If the rate hikes are not helping, we shouldn't be doing them.
I agree that interest rates should be above the rate of inflation. I also realize that this will cause much pain, but I believe it's preferable to letting inflation spiral completely out of control and destroying what little value our currency has left.
I just would like to see some more evidence that the rate hikes are in fact containing inflation. Right now, that evidence is sketchy at best.