Kansas City Fed ALMOST Explains Inflation

Actually . . . This a very easy to understand primer on how monetary policy can't solve a great many longstanding problems.

Here's the overview . . .

"Over the past year, the Federal Reserve has rapidly raised interest rates to try to mitigate inflation. Nevertheless, the labor market remains tight, supporting ongoing elevated inflation. Why has rapid monetary policy tightening not yet cooled labor markets enough to quell the current bout of inflation?

"One explanation lies in the degree to which some sectors of the economy are less sensitive to changes in interest rates than others. The services sector, in particular, has contributed substantially to recent inflation, reflecting ongoing imbalances in labor markets where supply remains impaired and demand remains robust . . ."

Read more via www.TonysKansasCity.com link . . .

Why Has Monetary Policy Tightening Not Cooled the Labor Market Enough to Quell Inflation?

Despite a year of rapidly rising interest rates, labor markets remain tight, likely contributing to the persistence of inflation. We create industry-specific versions of the KC Fed's Labor Market Conditions Indicators (LMCI) to examine labor market tightness in different sectors.