rock, hard place

The above chart of commodity price levels shows what was motivating the Fed. They were scared of what looked like a deflationary trend between 2006 and 2016. They were trying to counter that.

2008 made everybody think of the possibility of depression. For a long time economic growth has been slogging between slow and none. So the Fed got more and more stimulative. Still, growth and inflation seemed to stay stubbornly low. The money went into financial assets instead of the real economy. Eventually the Fed went too far and induced inflation. Still not much growth, but price inflation. Well, they had pumped so much liquidity into the economy for so long that now, despite sharply higher interest rates and a sharply contracting money supply, prices are wiffling down only very slowly and gradually … home prices, stock prices, gas prices, commodities, etc.

Growth is down to zero, yet prices are still too high. That’s why they say the Fed is stuck between a rock and a hard place.