To fix America’s inflation problem, the Federal Reserve must go big

Over the summer a wild hope took hold among investors. Inflation seemed to be falling gently even as America’s economy stayed in rude health. Perhaps the worst bout of inflation since the 1980s would be easily quelled, without interest rates rising much further or much economic pain. Now the dream has been dashed. Figures published on September 13th show that the pace of underlying inflation in August was fast and furious. Stockmarkets fell by the most since the early months of the pandemic; the price of junk bonds dropped; and short-term Treasury yields spiked. America still has an inflation problem. To fix it, the Federal Reserve must go big.