The FED's Inflation Fiasco

Imagine that your plumber has a hazy understanding of how the water system in your society/apartment works, and he has been repairing that for years, until something's out of control one day and he knows nothing of what to do next, and everyone is searching for life jackets the next moment.

This is how the world economic system had collapsed due to the Covid 19 pandemic, especially in US. The Federal Reserve (also known as the FED) i.e. the central bank of the US, also hadn't saw such inflation previously as it has seen post pandemic.

Their reckless money printing habits also had their share in the inflation pie. Then the FED resorted to saying that the inflation, as they saw it first, was transitionary and they had a long-term monetary plan for tackling it, only for them to withdraw it later.

Attacking the inflation monster with ill-suited tools which included a barrage of unprecedented rate hikes which also brought with it recession and a possibility of financial crisis, or both.

These failures to control inflation had a real cost across the globe. Workers demanded more wages as their current wage level was causing a decline in their standard of living, companies weren't able to pay those wages and salaries as their input costs and borrowing costs had shot up.

But why are Central banks the lone inflation fighter in the country? That too they're claimed to be autonomous and independent but when elections arise, and politicians want to show the growth in the economy, all this autonomy vanishes and interest rates are cut when they actually should have been hiked.

It is assumed that monetary policymakers who are assigned with controlling inflation, know what caused it in the first place. But the heavy rise in prices suggest they don't.

To conclude, it's also time that governments and central banks come together to help the economy prosper, and also the policymakers should be held accountable if targets are missed, just like the CEOs and Portfolio managers on Wall Street.