The US economy, however, is in a very different situation from what it was in the 1970s, says Times columnist Paul Krugman. While inflation was deeply entrenched in the early 1980s, “the public now expects high inflation in the short term but a return to normal inflation thereafter,” he writes. “Financial markets, where you can extract inflation expectations implied by the spread between indexed and non-indexed consumer price bond yields, tell the same story: inflation today but not so much tomorrow .”

Ben Bernanke, who chaired the Federal Reserve during the Great Recession (another time of heightened fears of stagflation), agrees. Unlike President Biden, Presidents Johnson and Nixon have exerted strong pressure on the Federal Reserve to refrain from economic-slowing measures that could reduce inflation for fear of a backlash. of the electorate.

Today, Bernanke argues, the Fed is a much more independent institution that better understands how inflation works and what it can do to control it: “In short, the lessons learned from the great American inflation, at the times by the Fed and political leaders, making a repeat of this experiment highly unlikely.

What to pay attention to

The Federal Reserve’s plan to rein in soaring consumer prices doesn’t have to cause stagflation or a full-scale recession to make the average American feel stuck. Earlier this month, the chief executive of JPMorgan Chase warned that an economic “hurricane” was on the horizon. “We just don’t know if it’s Minor or Superstorm Sandy,” he said. said, but “you better get ready.” Against what?

• Amid a nationwide shortage of affordable housing, rising mortgage rates are expected to drive up the cost of home ownership even further in the near term, pushing people who might otherwise buy into overheated rental markets. And higher rents could in turn support high inflation, Lisa Abramowicz Remarks at Bloomberg.

• By increasing the cost of business borrowing, interest rates slow business growth and drive up unemployment. This week, former Treasury Secretary Larry Summers said that to control inflation, the unemployment rate should exceed at least 5%, against 3.6% today. “To state the obvious,” Washington Post business reporter Jeff Stein tweeted“a 5% unemployment rate would mean devastating unemployment for millions of poor working Americans.”

• Rising unemployment is accompanied by a reduction in the leverage of workers in the labor market, which could slow down wage growth even if it has failed to keep pace with inflation. “The transition is going to be very difficult,” Seth Carpenter, chief global economist at Morgan Stanley and former Fed economist, told The Times. “At least historically, it takes a long time for inflation to come down, even after the economy has slowed.”

Some economists say the White House and Congress should do more to bring inflation down faster and cushion the blow to average Americans. Michael R. Strain of the American Enterprise Institute, for example, believes that Biden should finally reverse the Trump administration’s tariffs on Chinese goods, which, combined with other trade liberalization policies, could reduce inflation by up to 2 percentage points.

While Biden is reportedly considering asking Congress to suspend the federal gasoline tax to lower its price by 18.4 cents a gallon, Claudia Sahm, a former Fed economist and Times Opinion writer, argue that it is a “bit fanciful” idea which does not solve the problem at the root. Instead, she thinks the administration should draft contracts with domestic oil producers with a guaranteed minimum price to encourage production, which would lower the price of gas in the near term, while Congress should pass legislation to accelerate the transition to renewable energy, which would reduce the country’s dependence on fossil fuels in the longer term.

“The Fed Can’t Print Oil or Wheat,” Sahm writing. “If the Fed fights inflation alone, people will suffer.”