The Fed is allowing inflation to rise, and they have an opportunity to bring it down with their interstrate policy. They're taking a riskthere coul be a lot of reasons for we on e to go in to that right now,. But the risk is eflation will rise even higher, and the the reckoning will be even sharper.
What's so bad about rising inflation? Why should we aim for a rate of 2 percent? Why is it a problem if interest rates are too low--and what do we mean by inflation, anyway? Stanford University's John Taylor talks with EconTalk host Russ Roberts about these questions, the Taylor Rule, why inflation is rising, and what the Fed should do about it. At the end of the conversation, Taylor discusses whether stimulus stimulates and the dangers of the national debt.