Only a new policy regime can stop rampant inflation, but don’t count on it yet

Three decades of expansionary monetary and fiscal policies coupled with low inflation may lead rate setters to overestimate their confidence that low inflation expectations will persist, or believe they have more time to act on inflation. The Fed (and other central banks) faces what we call the ‘Great Paradox of Monetary Tranquillity’. This reasoning implies much more aggressive actions will be required later on, at a much higher cost,