Sticky inflation with monetary and fiscal imbalance When it comes to the fight against inflation, monetary policy and fiscal policy are misaligned. Monetary policy is managed by the Federal Reserve and consists of changes in interest rates and the amount of money in circulation. Fiscal policy, on the other hand, refers to government spending and taxation. The two policies should be carefully balanced as both have their own distinct advantages in fighting inflation. Verify my mortgage eligibility (Mar 3rd, 2024) However, this does not appear to be the case presently. Monetary policy has often been used as a tool to combat inflation, largely because of its ability to control the money supply. By raising interest rates and restricting the amount of money in circulation, the Federal Reserve can make it more expensive to borrow money and therefore reduce consumer spending. This helps to curb rising prices. On the other hand, fiscal policy is usually seen as a way to stimulate economic growth by increasing government spending and lowering taxes. While these measures can have positive effects on GDP growth, they can also inadvertently cause price levels to rise if not carefully managed. The misalignment between monetary and fiscal policies when fighting inflation arises from the fact that while one aims to restrict spending and limit demand-driven inflation, the other seeks to increase spending and stimulate economic growth. This can create an imbalance in the economy that can lead to higher inflation levels if not carefully managed. To ensure that both policies are working together, it is important for policymakers to consider all factors when making decisions and come up with a strategy that takes into account both policies. By doing so, they can effectively tackle inflation and prevent it from adversely affecting the general public. Verify my mortgage eligibility (Mar 3rd, 2024) The Fed continues to press ahead with its fight to bring down inflation as it raised its short-term rates again by another .25%. But are they fighting an uphill battle as Fiscal policy is looking at significant increases in Federal spending? There appear to be some opposing forces at work here and the consumer is stuck in the middle. As the rapid increases in the Fed rates start to filter through the economy more segments will begin to feel the effects of this policy. It appears the Fed will continue this course until we see more cracks in the economy much like we have seen with several banks over the past couple of weeks. As a consumer, it is important to manage this changing inflation environment. First, look at how your income and expenses are changing. Make sure you have savings in place in case there is a sudden change. Finally, watch the markets carefully to get a sense of where policy is likely to head. If you are prepared for changing economic environments that you will be best prepared to take advantage of opportunities when they arise within this economic cycle. Click here to see the full article Show me today's rates (Mar 3rd, 2024) Peak Capital Mortgage, LLC Rocky Mountain Region & More Click to Call or Text: (970) 577-9200 This entry has 0 replies Comments are closed.