Just when you thought you might get a little relief from high inflation, a top economist says otherwise.
And he said that as long as inflation remains high, the Fed will keep raising interest rates to try to keep it down.
“Expect the Fed to be aggressive because inflation isn’t simply going away,” Columbia University economist Jeffrey Sachs told CNBC’s Street Signs Asia on Wednesday.
Sacks appeared to have the proof hours after the interview, when the latest minutes from the Fed’s July meeting indicated that officials would consider another rate hike if inflation remained high, they said. said “this may be true for some time”, “and keep those rates until the economy starts to finally cool down.
” Participants agreed that the pace of policy rate hikes and future policy tightening will be important The extent will depend on the impact of upcoming information on the economic outlook and risks to the outlook,” the Fed minutes read. While prices were unchanged from the previous month, they were still up 8.5% year over year. The Federal Reserve has raised interest rates several times this year in an attempt to cool inflation, much to the chagrin of borrowers and potential homeowners.
Sachs said he believes the root causes of the current high inflation in the U.S. started even before the pandemic, but the government’s response to COVID is what’s driving prices up today.
“The Fed is really remarkable Increased the money supply, especially in the first few months of the pandemic — it wanted to avoid any sort of financial crisis,” he said. “It did that successfully, but it certainly drove a lot of inflation.
Many prominent economists, including Treasury Secretary Janet Yellen, initially thought inflation would be temporary, but it has proved remarkably stubborn. Putin’s invasion of Ukraine in February also fueled prices Rising, which has pushed up fuel prices around the world and disrupted key supply chains.
Sachs doesn’t think inflation will go away “anytime soon,” but didn’t detail a timetable, adding “Central banks, especially the Fed, need to be more aggressive.
“We are constantly generating supply-side shocks through wars, sanctions and geopolitical tensions,” the economist said. The shock isn’t going away anytime soon. ”
Fortune Features email list so you never miss our biggest features, exclusive interviews and surveys.