That’s one school of thought, but it’s not the only. Raising taxes on corporations and high income earners (ie the people that actually have money) is certainly another solution, though obviously unpalatable to those current in charge of policy. It’s telling that the Fed frames layoffs of the people most impacted by high inflation, the lower and middle classes, as required.
Exactly: monetary and fiscal policy need to work together to bring down inflation. It's depressing that we're so defeated by seemingly endless congressional dysfunction that the idea that fiscal policy is even an option is beyond our comprehension.
It's unfortunate, too, because fiscal policy can be surgically precise, unlike monetary policy. If you were trying to assassinate inflation, monetary policy would be like carpet bombing the city where inflation lives, instead of fiscal policy sending in Seal Team 6 to inflation's home address.
To be fair, the Fed has fairly blunt monetary policy tools; distributional impacts like that are the realm of Congress and fiscal policy. (Which fairly consistently drops the ball, but blaming the Fed for the inaction of the entity which both sets the Feds toolset and mission and then doesn’t deal with the problems inherent in the Fed executing that mission with the toolset it has is kind of badly missing the point.)
Additionally it's hard to blame the Fed for overreacting to the COVID crisis because they had to act quickly and previously they haven't been able to rely on sensible fiscal policy.
Fed deployed the tools they had then and they are doing the same now, thankfully taming inflation is something they have more experience with vs pandemics.
1. I’m not sure why you think it’s not their job. If we did a responsibility matrix for the Fed, they wouldn’t be responsible or accountable for tax policy but they would be consulted. Obviously we want monetary and fiscal policy to work together for the most impactful outcomes. Government agencies and bodies advise each other all the time, and that’s a good thing. It’s call effective governance.
2. I’m not sure why that’s relevant to this conversation and I also reject your premise that tax cuts on the wealthy help the middle class. The last round of cuts made the corporate tax rate lower permanently and the individual and family tax cuts expire soon. Of course if you live in an expensive place like California or New York, you received a tax increase, not a cut.
