Quote:
Originally Posted by bizaro86
Right, that is why they raise interest rates to combat inflation. But inflation expectations are a powerful force that increases future inflation - so if they become intrenched interest rates will need to rise much higher than otherwise.
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Stagflation. Which is what we had in the 70s, because they didn't attack inflation diligently enough. Then it got entrenched. Then high interest rates hurt the economy, but we still had inflation.
Everyone learned that lesson the first time. That is what cannot happen. So attack inflation quickly.