On Monday, prominent economist and former White House official Tyler Goodspeed warned that the two expected hikes in the key interest rates next year will likely be insufficient to stop the growth of inflation.
“We are still $1.8 trillion cumulatively short on business investment. So I think the bigger picture macro situation still points to a lot of inflationary pressure, and I don’t know that the two rate hikes are going to cut it,” Goodspeed said during an appearance on Fox News.
Goodspeed formerly served as chairman of the Council of Economic Advisors on behalf of the administration of former President Donald Trump. He resigned from this position in the wake of the Jan. 6 breech of the United States Capitol building.
The Federal Reserve initially lowered its rates in March 2020 in response to the onset of the CCP (Chinese Communist Party) virus pandemic in order to provide some measure of economic stimulus to offset the cost of the lockdowns. This strategy has thus far prevented a long-term recession, but the Federal Reserve must now walk a delicate balance of mitigating inflation without threatening the integrity of markets.
Goodspeed believes that the proposed interest hikes will be too little, too late to stop the growth of inflation; and he’s not alone. Last week, former Treasury Secretary Larry Summers suggested a total of four interest hikes in 2022 during a conversation with Bloomberg.
“I think four interest rate hikes next year are less likely to tip us into a recession … than eight interest hikes the next year. And so I think we have got to get ahead of the curve rather than be behind the curve with respect to inflation risks … we should be signaling that as a very plausible possibility,” Summers warned.
In the year spanning from October 2020 to October 2021, prices grew by a rate of over 6.2 percent, according to the Consumer Price Index—the highest rate of inflation in three decades.
This pattern is expected to hold in the upcoming results from November, and the rising costs accompanying inflation show few signs of abating without intervention from the Federal Reserve. The result of inflation is an additional burden on the lower and middle classes, as wages struggle to keep up with the rate of inflation on necessities and consumer products.
With his recent remarks, Goodspeed joins a growing chorus of experts calling on the Fed to take more drastic action to prevent further inflation and economic damage. While the situation remains delicate as ever, the stakes could not be higher, as consumers continue to adjust while struggling with raising prices in a fragile economy.