Current Monetary Policy May Be Less Restrictive Than It Seems

Johannes Matschke and Alice von Ende-Becker

Economic Bulletin, 2024, 4

Abstract: Compared with most historical inflationary episodes since the 1960s, the current U.S. inflation cycle features both higher core inflation and a more resilient real economy. This co-movement of prices and real activity suggests monetary policy has not sufficiently reduced demand. We examine the current policy stance and argue that interest rates may indeed be less restrictive than commonly thought. To lower inflation to 2 percent, the Federal Reserve may have to maintain a restrictive policy stance for some time.

Keywords: monetary policy; real GDP; Inflation (Finance) - United States (search for similar items in EconPapers)
Date: 2024
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