Central banks will fail to tame inflation without better fiscal policy, study says-(to the moon)

https://www.reuters.com ^ | August 27, 2022 | Reuteurs

[RomanSoldier19]

Central banks will fail to control inflation and could even push price growth higher unless governments start playing their part with more prudent budget policies, according to a study presented to policymakers at the Jackson Hole conference in the United States.

Governments around the world opened their coffers during the COVID-19 pandemic to prop up economies, but those efforts have helped push inflation retest their highest levels in nearly half a century, raising the risk that rapid price growth will become entrenched.

Central banks are now raising interest rates, but the new study, presented on Saturday at the Kansas City Federal Reserve's Jackson Hole Economic Symposium argued that a central bank's inflation-fighting reputation is not decisive in such a scenario.

"If the monetary tightening is not supported by the expectation of appropriate fiscal adjustments, the deterioration of fiscal imbalances leads to even higher inflationary pressure," said Francesco Bianchi of Johns Hopkins University and Leonardo Melosi of the Chicago Fed.

[RomanSoldier19]

[BitWielder1]

They will try everything except reduce government spending, the only thing that could actually work.
Opening the oil and NG spigots would lower energy costs which would certainly help.
But as long as the government is working against the people, no gimmicks will succeed.

[InterceptPoint]

My recommended policy:

1. Don’t spend more than you take in from taxes.

2. Never print money from nothing - even if your Central Bank says it’s OK.

3. If you really want economic progress - cut taxes and spending. And no cheating on items 1 and 2.

[GaltAdonis]

"...unless governments start playing their part
with more prudent budget policies."

.

For 'prudence' I bet they would copy Pooh's 'prudent' honey policy.

/Sarc

[SaxxonWoods]

Democrats are not about to slow their spending and Republicans will help them while pretending to gripe.

This means opportunities for those with the resources to take advantage. The poor and the working class are screwed, as usual. The middle class is screwed except for the smart ones, who will find ways to get ahead.

[Saintgermain]

Too bad that the US is on the same path as Argentina where poor politics, graft and corruption pretty well have destroyed the economy and I don’t think it will get better anytime soon. For things to get back on track and re-introduce people to reality; and this is a maybe, it may take another major war quite possible WW III and it seems the US government is diligently pushing in this direction fanning the flames with Russia. Or some natural disaster of cataclysmic proportions. I hate to say and see it, but most people are not about to change unless they are forced to do so and we are not quite there yet, but we are getting there at a fairly rapid pace.

[fhayek]

Well, they pumped so much conjured-out-of-thin-air money during the Covid shut down, that mere half point increases in the Fed funds rate will not do the trick. They must do some quantitative tightening which would involve selling back all those securities that the Fed has acquired over the years. That, coupled with economic policies that encourage production of goods and services (things like cutting taxes (especially corporate taxes), encouraging energy production and cutting regulations. Very much like you suggest.

Unfortunately, there is nothing that suggests that the current crop of leaders will do anything of the sort.

[InterceptPoint]

Unfortunately, there is nothing that suggests that the current crop of leaders will do anything of the sort.
+++++
No they won’t. Republicans cut taxes and regulations. Dems never do. I would like to brag about Trump’s deficit spending but he was no angel. Well maybe he was compared to Sloppy Joe.

In any case, I want him back in charge of the economy. He had it humming along. He would do it again.

[Paperpusher]

But, but, Biden just announced that inflation was zero in July.

https://nypost.com/2022/08/10/biden-wh-claims-us-has-zero-inflation-despite-high-rate/

[Pearls Before Swine]

I take it you’re not a fan of modern monetary policy, which foolishly states that a government can take on as much debt as it wants, as long as it is in its own currency.

[InterceptPoint]

I’m very old fashioned. I remember the Gold Standard and Fort Knox. Now we trade our worthless pieces of paper for the Fed’s worthless pieces of paper and call it money. Nothing to back that money up on either side.

And, to top it off, we pay the Fed bankers interest on their pretend money. Some would call that a racket but I’m too nice to do that.