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How the Federal Reserve can fix America's economy

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Federal Reserve Bank of Kansas City
Esther George (above), president of The Federal Reserve Bank of Kansas City offers her views on the current economy

The days of the Federal Reserve pushing mountains of money into the economy appear to be coming to an end.

Esther George, president of the Federal Reserve Bank of Kansas City, is calling for a rise in interest rates to begin to curb inflation, which is running at a nearly 40-year high.

This amounts to a balancing act for the Federal Reserve, which wants to keep the economy humming. Raising interest rates and pulling dollars out of the system tend to work against that.

Since the Fed slashed its benchmark rate to almost zero in 2020, lower interest has encouraged consumer buying, but it's also fueled greater risks.

As George sees it, "I think we've arrived at point now, however, that we see the effects of that policy are no longer needed in the magnitude that they have been earlier."

It's time for some adjustments, George believes, including the Federal Reserve raising the short-term interest rate and to retreat from its buying of Treasury bonds and mortgage-backed securities that have ballooned the Fed's balance sheet.

As for future actions by the Fed's Federal Open Market Committee, of which she is a member, George says "that the committee is going to have to do a very difficult dance of figuring out the combination of interest rate increases and balance sheet adjustments that will allow the economy to continue to grow but to bring down inflation."

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When I host Up To Date each morning at 9 a.m., my aim is to engage the community in conversations about the Kansas City area’s challenges, hopes and opportunities. I try to ask the questions that listeners want answered about the day’s most pressing issues and provide a place for residents to engage directly with newsmakers. My email is steve@kcur.org.
As senior producer of Up To Date, I want our listeners to hear familiar and new voices that shine light on the issues and challenges facing the myriad communities KCUR serves, and to expose our audiences to the wonderful and the creative in the Kansas City area. Just as important to me is an obligation to mentor the next generation of producers to ensure that the important conversations continue. Reach me at alexanderdk@kcur.org.
Reginald David is an assistant producer with Up To Date. You can reach him at reginalddavid@kcur.org.
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