The Fed Replays History: Lessons in Dealing with Inflation

Published January 11, 2023

Historically, the Federal Reserve has contributed to periods of high inflation—followed by painful recessions—by responding sluggishly to economic signals. The Fed appeared to have learned its lesson after the recession of 1980–82, which was followed by 40 years of relatively low inflation. But after the pandemic of 2020, the Fed was slow to respond to mounting inflation. Adherence to a rules-based approach would discourage such mistakes in the future.

Discussion Questions:

1. Is the Federal Reserve responsible for the inflation after the pandemic? Why or why not?
2. How would you prevent inflation from occurring?

Additional Resources:

• Read “The Fed Replays History,” by Michael D. Bordo and Mickey D. Levy. Available here.
• Read “Digital Currency and the Future,” by Michael D. Bordo. Available here.
• Read “Is the Fed’s Slow Response Making Inflation Worse?” with John Cochrane on PolicyEd. Available here.