Project SyndicateProject Syndicate

How not to fight inflation

By Joseph E. Stiglitz

26 Jan 2023 · 4 min read

Increasing interest rates further is likely to have little to no effect on inflation, Joseph E. Stiglitz argues in Project Syndicate. Indeed, this policy could actually be doing more harm than good.

Curated by informed

NEW YORK – Despite favorable indices, it is too soon to tell whether inflation has been tamed. Nonetheless, two clear lessons have emerged from the recent price surge.

First, economists’ standard models – especially the dominant one that assumes the economy always to be in equilibrium – were effectively useless. And, second, those who confidently asserted that it would take five years of pain to wring inflation out of the system have already been refuted. Inflation has fallen dramatically, with the December 2022 seasonally adjusted consumer price index coming in just 1% above that for June.

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