There is a policy fight underway internationally, purportedly over the issue of how to address the explosion of inflation. In Europe, outgoing Bundesbank President Jens Weidemann is calling for monetary tightening to try to contain inflation, while ECB President Christine Lagarde says the opposite, despite soaring inflation which, she admitted, is “unwelcome and painful.” In the U.S., James Bullard, the president of the Federal Reserve Bank of St. Louis, is telling Fed Chairman Jerome Powell that he should “taper” faster, i.e., slow down the rate of inflationary quantitative easing: “It makes sense to try to move a little bit more hawkishly here and try to manage the inflation risk,” Bullard said in an interview this week on Bloomberg Television. Similarly, Goldman Sachs is predicting (i.e., it favors) two interest rate increases next year, nearly a year earlier than their previous projections.
On the other hand, on Nov. 18, AP quoted Mary Daly, president of the the San Francisco Federal Reserve Bank, as saying last week that she thought “the Fed should continue its current pace of tapering through June, and then, assuming the pandemic steadily loosens its grip on the economy, wait to get a clearer sense of whether inflation will fade.”
