... and a hard place.
It’s not there now, but the US Federal Reserve Bank might be in this predicimant in the not-to-distant future. Let me explain:
If Trump’s new-found infatuation with tariffs produces, as predicted by many “pundits,” higher inflation rates ... then the tool that the Fed uses to keep the lid on this ogre, higher interest rates, can’t be as effective in the sense that it strengthens the dollar which boosts imports ... working against Trump’s trade war ... and also makng the job of financing American deficits more difficult.
However, if the Fed night chose to let inflation rip, it would be effectively monetizing our national debt ... good for our country but bad for those elders on fixed incomes ... and China which would own a lot of this devalued debt.
At least two factors are working counter to inflation spikes — massive illegal immigration which holds down wages on the low end ... and huge increases in energy production which holds back gas price increases. And this is further complicated by the Fed’s desire to reduce its inflated balance sheet, a legacy of the Obama-era quantative easing.
So, in a way, the Fed is boxed in when it tries to set monetary policy ... not a happy place to be. I don’t envy Chairman Powell.
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