Comment by Marsymars
13 days ago
Right, I’m just saying that raising interest rates in response to that doesn’t make any sense. It would be functionally equivalent to raising interest rates as a response to an increase in the income tax rate in order to restore the buying power of your pre-tax-increase income.
Powell seems to disagree: https://archive.ph/hbwTZ
Link seems broken? From what I’ve seen of what Powell has said, it seems to track with my post, e.g. “Our obligation is to keep longer-term inflation expectations well anchored to make certain that a one-time increase in the price level does not become an ongoing inflation problem,”
i.e. It’s not the price increases directly caused by a tariff or sales tax that they’re trying to prevent, it’s any knock-off effect in price expectations that causes additional inflation.