Stagflation

Describing the Federal Reserve chair’s monetary policies as “ill-advised,” the President and his Treasury Secretary doubled down on the White House’s urgent message: the central bank’s steadfast refusal to lower interest rates was strangling the economy by making it too costly for creditworthy borrowers—from prospective homebuyers to small business owners—to take out a loan. In a television interview, the President took aim at the Federal Reserve’s monetarist approach, which relies too much on a single factor—the money supply or the actual pool of banknotes in circulation—to tame inflation. Tightening the money supply through high interest rates tends to exert downward pressure on inflation, but it also discourages borrowing, and consequently, business activity that drives a consumer economy.