In the wake of the Federal Reserve Board's recent decision to raise short-term interest rates (and indications that they plan to further raise rates over the coming year), I am concerned that our national conversation about responses to inflation has been unduly constrained.
Among the many possible responses to rising inflation (specifically, the demand-induced inflation we are currently experiencing because of excess liquidity, or “too many dollars chasing too few goods”), there are two main possibilities:
Option A: Raise interest rates. (This is generally the only option we are allowed to discuss in media, government or polite company.)
• Raises the cost of borrowing.