In previous tightening cycles, the Fed has had to lift the policy rate above inflation to bring price dynamics back under control. Today, the policy rate is barely above zero while headline consumer price index (CPI) inflation is close to 8%. Headline inflation would end the year at 5.6% -- three times higher than the projected end-year policy rate. NOT JUST SUPPLY SHOCKTo be clear, inflationary supply shocks are playing a role here -- but they are certainly not alone. To bring inflation under control, the Fed will need to undertake much more aggressive policy tightening than it currently envisions.

Source: Bangkok Post April 04, 2022 08:39 UTC