Inflation is causing real pain. But raising interest rates will make it worse

theguardian.com:

Today American policymakers face a stark choice. Either, they can fight inflation by continuing to hike interest rates to generate unemployment and bring down aggregate demand. Or, they can employ a surgical approach that reins in the price increases that have been driving inflation, while encouraging investments to overcome chronic supply chain issues.

The current inflation situation hasn’t been about all goods in the economy getting more expensive at the same rate. Specific goods – food, fuel, cars, and housing – have been experiencing massive price shocks, raising the general inflation level substantially. Controlling these changes would require aggregate demand to shrink to unbearable levels for average Americans – essentially making people too poor to buy goods, and thus alleviating bottlenecks. Rate hikes are not only ill suited to bring down these essential prices but risk a recession throwing millions out of work.

This is not only a bad choice for economic growth; inducing a recession has wide ranging electoral and social consequences. The burden of the pandemic and inflation has been distributed very unequally with low income households and Black and brown communities carrying the heaviest weight in both emergencies. Relying on rate hikes means shifting the burden once more on their backs. But there is an alternative: the Emergency Price Stabilization Act just introduced to Congress and the Inflation Reduction Act are pointing the way in a more hopeful direction.

To be clear, policymakers are in a legitimate bind. Inflation, meaning a rise in the general price level, is hitting the American people hard, causing a real crisis for many struggling to meet their mounting bills. So far, the inflation response has relied