Yes, we need to react to rising inflation, but carefully [“Bohanon & Curott: Policymakers now need to rein in economic stimulus,” Feb. 11]. A couple of reasons for caution:
Inflation is high in many advanced countries, including some that did not provide the stimulus that we did. Supply disruptions are affecting everyone, but our inflation rate is still a little higher and some of this can be attributed to our stimulus.
At the same time, we also need to acknowledge that our employment-to-population ratio is still below pre-pandemic levels (and very much below what it was before the Great Recession). Our industries are much more concentrated and unions much weaker than the last time we had significant inflation. Embedding inflation in wage growth is not the same risk as before.
If we use interest rates to react to inflation (rather than supply-side interventions) the burden will be felt by construction workers and other interest-rate-sensitive occupations. So, caution. We need to react but carefully.
–David Kelleher
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