Raising rates won't fix the energy shock
History should be the Federal Reserve’s best teacher in September. It has already shown what happens when central banks answer an energy shock with higher interest rates: employment weakens, investment retreats, and policymakers eventually reverse course after families and businesses have absorbed unnecessary damage. The Fed can learn that lesson now, or make working Americans pay for the same shock twice.
TL;DR
- Raising rates against an energy shock will not defeat inflation at its source.
- This policy will weaken families, businesses, housing supply, and productive investment.
- The strongest policy is not always the one that moves.
- In September, strength means learning the lesson before making working people pay twice.