"VIDEO: Deflating The GOP’s Inflation Fear-Mongering"
The Federal Open Market Committee — the group that decides monetary policy at the Federal Reserve — will conclude its latest round of meetings today. The Fed is under growing pressure to do something to aid the still struggling economy, perhaps even a third round of quantitative easing. A statement released this afternoon will announce the Fed’s intentions going forward.
If the Fed does decide to act, it’s almost a certainty that Republicans will cry foul. Ever since the recession, Republicans have regularly denounced the Fed for taking steps to help the economy, warning that runaway inflation is just around the corner. But these predictions have been repeatedly discredited by the path inflation has actually taken. ThinkProgress has the video report:
Since the 2008 financial crisis, the rate of conventional inflation only briefly touched 4 percent before falling back below 2 percent earlier this year. Core inflation — which removes energy and food prices in order to smooth at noise in the measurement — finally got just above 2 percent in late 2011 and has plateaued since. Indeed, looking back over the last few decades, the country’s inflation rate since the 2008 recession has been at near-historic lows. Certainly far below the 12 to 15 percent inflation the country experienced in the 1970s and 1980s — presumably the memory that’s driving the GOP’s warnings.
Because inflation is fundamentally the result of a growing economy, most any monetary policy that seeks to boost growth out of a depression will require a tolerance for at least temporarily higher inflation levels in order to be effective. But the Fed’s insistence on treating 2 percent inflation as a ceiling rather than one end of a balance between price stability and job growth has left the country mired in high unemployment.
The GOP’s inflation fear-mongering and outright political pressure on the Fed certainly hasn’t done anything to help with that imbalance. Last year some Republicans went as far as introducing legislation requiring the Fed to ignore employment levels entirely and just focus on price stability when deciding monetary policy.