Fed Hikes Last Year Would Have Only Modestly Curbed Inflation in 2022, Study Says
- San Francisco Fed model looks at counterfactual scenarios
- Monetary policy found to act with a lag of at least a year
The Marriner S. Eccles Federal Reserve building in Washington, DC.
Photographer: Stefani Reynolds/BloombergThis article is for subscribers only.
Federal Reserve interest-rate increases last year would have only modestly reduced inflation in 2022, according to a new study from the San Francisco Fed which examines what critics view as a costly policy error.
US central bankers have been slammed for delaying their response to surging inflation and only starting to raise rates from nearly zero in March. But hikes starting in March of last year and continuing through the beginning of 2022 would have only shaved off 1 percentage point from inflation, while increasing unemployment by 2 percentage points, San Francisco Fed economist Regis Barnichon found.