Tag Archives: Federal Reserve Bank

Is the Fed powerless to stop inflation if the economy recovers?

Steve Matthews and Michael McKee at Bloomberg seem to think so. But a simple idea occurs to me: if the Fed is really worried that banks will cause inflation by drawing down reserves, can’t the Fed just raise the required reserve ratio (that’s the percentage of a bank’s deposits [your checking account, for example] that it is required to keep in it’s reserve account at the Fed)? This seems too simple. Am I missing something or are Bloomberg’s reporters?