The Fed want inflation to diminish (in real terms) the mountains of debt the US government and consumers incurred in the past 20 years. At the expense of the poorest people and savers (because wage inflation is much lower than the goods/services inflation, not to mention bank savings interest rates, which are laughable).
Make no mistake, the Fed are not idiots, they have been trying to introduce inflation for a long time, but initially they succeeded in asset inflation only. With the help of Covid and the war, they got their wish.
But wage inflation needs to match the goods/services inflation, because without it, borrowers will be even less able to pay their debts.
In order to really stamp out inflation, the Fed would need to raise the interest rate to 10%, essentially forcing the US to declare bankruptcy.
The Fed is hoping to introduce a mild recession, which, they hope, would reduce all kinds of inflation, without them having to raise the rates above 3.5% or so.
How do interest payments to the poor help them? They spend way more in interest expenses, heck they even pay taxes which pay the interest on government debt. Oh and finally if you buy a product from a company that borrowed money, the marginal profit of a product is necessary to cover the interest expenses of the company meaning you as a consumer pay interest in the form of higher prices on products.
The idea that the rich pay interest to themselves is laughable.
Make no mistake, the Fed are not idiots, they have been trying to introduce inflation for a long time, but initially they succeeded in asset inflation only. With the help of Covid and the war, they got their wish.
But wage inflation needs to match the goods/services inflation, because without it, borrowers will be even less able to pay their debts.
In order to really stamp out inflation, the Fed would need to raise the interest rate to 10%, essentially forcing the US to declare bankruptcy.
The Fed is hoping to introduce a mild recession, which, they hope, would reduce all kinds of inflation, without them having to raise the rates above 3.5% or so.