Dallas Fed researcher cautions against expansionary policy
Study of US in the 1970s says oil shocks were not primary driver of inflation
Cutting interest rates to stimulate the economy risks setting off an inflationary spiral similar to the one the US suffered in the 1970s, research published by the Federal Reserve Bank of Dallas finds.
“A well-intentioned policy of stimulating the economy by lowering interest rates has the potential of inadvertently reigniting inflation,” Lutz Kilian, a vice-president at the Dallas Fed, says in the article published on February 17.
Kilian draws lessons from the 1970s, saying they appear relevant
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