Nevada's Economy: Is U.S. Monetary Policy Creating an Inflationary Environment?
With the U.S. economy still performing poorly, U.S. monetary policy remains quite easy. Because expected inflation is greater than short-term interest rates, real short-term interest rates are negative. In addition, the Federal Open Market Committee (FOMC) announced on Wednesday, June 20 that it will take steps to further reduce long-term interest rates by selling some of the shorter-term government bonds it holds and using the proceeds to buy longer-term government bonds. Is conduct of monetary policy creating an environment in which we should worry about inflation?