Unlike Volker, Powell won’t be able to raise rates sufficiently to bring down inflation because the $30 trillion in debt makes it untenable. There may be a temporary pause as we head into recession and Powell starts to unload the Fed’s balance sheet, but I see inflation continuing for years to come.
Good point. As a nation, we have so much debt that we can’t afford to pay more than about 2.5% interest on 10-year treasury bonds, in the long term. So the Fed can’t keep the Fed funds rate above 3% for more than a few quarters. They’ll bring actual inflation down to about 3.25%, and then use statistical adjustments at the BLS to bring reported inflation down to around 2.4%, and then say that’s low enough.
An end to the stupid war in the Ukraine and restrictions on Russian exports of natural gas will eventually help to bring down energy prices and inflation.