The Federal Reserve’s continued focus on demand-side tools treats today’s inflation as though it were purely a story of an overheated economy, when a meaningful share of current price pressure traces to supply-side frictions that interest rates do little to address.

Raising rates to fight supply-driven inflation risks doing real damage to employment and growth without addressing the underlying cause, a mismatch that has bedeviled central banks in past episodes of supply-shock inflation.

A more honest accounting would pair the Fed’s rate decisions with clearer public argument about which portion of inflation monetary policy can actually address. This is an opinion piece and reflects the views of the author, not necessarily Bear News 365’s editorial position.