The Fed raised rates another 75 basis points this week in its aggressive effort to curb inflation. Worryingly, it sees the strength of workers as standing in the way of its goal.
As always, a pleasure to read, though I still have some curiosities about the effects of a windfall tax, as it has been the case in Spain or the UK? Does it have any impact on the inflation rate at all or does it actually lead to a rise in costs, because companies, witnessing the adaptation of such a tax, will then adjust their prices?
Windfall tax should in principle pull some demand out of the economy. (Less to give out in shareholder buybacks.) Though it's more of an equity issue. Canada did one too on grocery stores.
By focusing on top-line inflation, the Fed targets a lagging indicator using a tool with long and variable delays. How can they avoid getting whipsawed? And how does embedding higher corporate taxes into the price structure help inflation come down, unless those taxes reduce aggregate demand (through layoffs)?
As always, a pleasure to read, though I still have some curiosities about the effects of a windfall tax, as it has been the case in Spain or the UK? Does it have any impact on the inflation rate at all or does it actually lead to a rise in costs, because companies, witnessing the adaptation of such a tax, will then adjust their prices?
Windfall tax should in principle pull some demand out of the economy. (Less to give out in shareholder buybacks.) Though it's more of an equity issue. Canada did one too on grocery stores.
Thank you, Claudia! Looking forward to reading the next issue!
Did not graduate as an economics major, but definitely learned a lot from your stacks!
By focusing on top-line inflation, the Fed targets a lagging indicator using a tool with long and variable delays. How can they avoid getting whipsawed? And how does embedding higher corporate taxes into the price structure help inflation come down, unless those taxes reduce aggregate demand (through layoffs)?