Biden Administration and Fed in a Rock-and-Hard-Place Dilemma on Inflation Actions

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The recession vs. inflation conundrum will be a difficult one for the Biden Administration to navigate.

The Biden Administration and the Federal Reserve are finding themselves stuck between a rock and a hard place regarding inflation, writes Neil Irwin for Axios.

There are two available choices: be patient or enact money-tightening measures that could result in a recession.

The administration is already facing public discontent over the current economic conditions, and there is a high chance this discontent would only worsen in an out-and-out tailspin.

The inflationary pressures will most likely persist through this year and maybe beyond.

The national economy has weathered this precarious situation before. During the Reagan Administration, Fed Chair Paul Volcker engineered a steep downturn that ended the double-digit inflation of the early 1980s, but at the cost of double-digit unemployment.

This time, the Fed is looking for a gradual move toward higher interest rates. Economic policymakers hope that the safer option is to tolerate some pain now to bring better conditions in a year or so.

But while patience is a virtue, it is a risky political strategy.

President Biden’s approval ratings are already suffering due to inflation and could end up costing Democrats big in the mid-term elections in November.

Read more about the U.S.’s current decisions on inflation from Axios.

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