Comment Re:This makes for a nice degenerative feedback loo (Score 3, Interesting) 79
I heard an interesting observation that a lot of the price increases are driven by price-gouging rather than supply shortages since the price stayed high after supply chain blockages cleared, and continued to rise. Oil prices are well off peak levels as well and doesn't account for the rising prices in the various goods and services. Essentially, companies observe that consumers expect that prices are going up in this inflationary period, therefore they've got a greenflag to raise prices on consumers. Normally you'd hope that a competitor would undercut them by selling cheaper and stealing their share, but having also recognized the opportunity to raise prices and their margins, they too are taking advantage of the opportunity to raise prices rather than attempt to take market share. The incredible growth in corporate profits and margins is both evidence and incentive for this behavior.
If this observation holds true then, raising interest rates doesn't stop the price inflation, because supply shortage wasn't the cause of the price inflation anyway, it was market sentiment that everyone can raise their prices. So the main tool of the Fed to combat inflation may not be relevant to the type of inflation we're seeing today. In which case, new tools for combating price inflation may be needed. Price manipulation is heavily frowned upon because in the past it was foolishly wielded to disastrous results by setting prices below cost of production, causing supply shortages and skyrockets blackmarket pricing. However, if price ceilings are set to curb unjustiable price growth in an inflationary period, at a level where it's still profitable to continue producing at existing margin levels, then hypothetically it'd be possible to stop inflation more directly. The challenge of course is figuring out how to implement such a mechanism without the many many unintended consequences it could incur if such direct action is carelessly applied.