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Fed Can’t Fix Fiscal-Driven Inflation: Jackson Hole Paper

The Federal Reserve won’t be able to curb inflationary pressures because they are rooted in expansionary fiscal policy, according to a paper presented at the central bank’s annual Jackson Hole conference on Saturday.

“The fact that approximately half of the recent increase in inflation has fiscal roots poses some specific challenges for policy makers today. Not only fiscal inflation tends to be highly persistent but it also requires a different policy response,” the paper’s authors, Francesco Bianchi of Johns Hopkins University and Leonardo Melosi of the Chicago Fed, wrote.