Can the Federal Reserve keep raising interest rates and defeat the nation's worst bout of inflation in 40 years without causing a recession?
Not according to a new research paper that concludes that such an “immaculate disinflation” has never happened before. The paper was produced by a group of leading economists, and two Fed officials addressed its conclusions in their own remarks Friday.
“There is no post-1950 precedent for a sizable … disinflation that does not entail substantial economic sacrifice or recession,” the paper concluded. The latest evidence of price acceleration makes it more likely that the Fed will need to do more to defeat high inflation. “History is useful, but it can only tell us so much, particularly in situations without historical precedent,” Jefferson said. “The current situation is different from past episodes in at least four ways.”
Problem is, inflation is also slowing more gradually and more fitfully than it first seemed last year. Earlier this month, the government revised up consumer price data. And over the past three months, core consumer prices - which exclude volatile food and energy costs - have risen at a 4.6% annual rate, up from 4.3% in December.
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