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Given a choice between a recession and runaway inflation, a competent central banker will choose recession any day of the week. Recession makes people’s lives miserable, but inflation blows up societies.

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Can you encourage price stability without a recession? Could the central bank create a recession that made peoples’ lives less miserable if they could target their economic activity destruction instead of the benchmark rate blunt hammer?

Perhaps the problem is a steady state versus growth model economic configuration, and we also need finer grained control over stimulating or discouraging very specific economic activities.

It’s hard to imagine a more targeted control than the benchmark rate, which has a direct impact only on people who manage money for a living and people who hold adjustable rate mortgages. It just manifests as a blunt hammer because the economy is interrelated, and I’d argue that any control big enough to make a difference will encounter this.

> people who hold adjustable rate mortgages

This is the vast majority of homeowners in most countries.

Which also spills into rent costs, of course.

We need negative interest rates instead of the quantitative easing nonsense.

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