'A large across-the-board increase in interest rates is a cure worse than the disease,' says economist Joseph Stiglitz. 'That might dampen inflation if it is taken far enough, but it will also ruin people's lives.'
As a number of economists have warned recently, policymakers on the verge of making life-altering decisions with respect to interest rates may be doing so based on faulty data or misconceptions.
Stiglitz, meanwhile, noted that"the inflation rate has been volatile. Last month, the media made a big deal out of the 7% in the United States, while failing to note that the December rate was little more than half that of the October rate." While"the U.S. has slightly higher inflation than Europe," he added,"it also has enjoyed stronger growth. U.S. policies prevented a massive increase in poverty that might have occurred otherwise. Recognizing that the cost of doing too little would be huge, U.S. policymakers did the right thing."
"What we need instead," he argued,"are targeted structural and fiscal policies aimed at unblocking supply bottlenecks and helping people confront today's realities."