Sep 15, 2026 · 5 min · 3 segments
Steve Forbes explains why the Federal Reserve must not hike interest rates this week and offers real ways Fed Chair Kevin Warsh can combat inflation without imperiling the economy. Learn more about…
Steve ForbesHost
The rationale for boosting interest rates is that inflation is proving tough to bring down.
The rationale for boosting interest rates is that inflation is proving tough to bring down, particularly with climbing energy costs caused by the ongoing conflict with Iran.
Making that situation particularly difficult right now is the Yemen-based Houthis, a radical terrorist group backed by Iran, are severely hampering the shipping of Saudi Arabian oil with its attacks on a critical pipeline and on vessels in the Red Sea.
The 10-year bond hovers near 5%, and the 30-year bond is at the highest level in nearly 20 years.
Advocates say a Fed hike would reassure the world that our central bank, with its new head Kevin Warsh, is serious about getting inflation down to its long-stated goal of 2%.
The idea that you control inflation by trying to up the cost of money is profoundly wrong.
The blunt truth is that manipulating interest rates is the wrong instrument to control inflation.
Believers in this fallacy assume that to get inflation down, one must depress economic activity.
They ignore that the very definition of inflation is reducing the value of a currency, usually, but not always, by creating too much of it.
This superstition is why the Fed has long had a bias against vigorous economic growth.
One is by announcing that henceforth the goal of monetary policy is a steady value for the currency, in this case the dollar.
To achieve stability, the central bank would increase or decrease the basic money supply until the desired level is achieved.
Money, after all, measures value the way scales measure weight, clocks measure time, and rulers measure length.
Yet central bankers and Treasury officials almost never mention currency exchange rates.
In fact, most economists and policy makers are wedded to floating exchange rates.
How about a floating clock? Everyone acknowledges that the current bump in prices mostly relates to Middle East turmoil.
The rationale for boosting interest rates is that inflation is proving tough to bring down.
The rationale for boosting interest rates is that inflation is proving tough to bring down, particularly with climbing energy costs caused by the ongoing conflict with Iran.
Making that situation particularly difficult right now is the Yemen-based Houthis, a radical terrorist group backed by Iran, are severely hampering the shipping of Saudi Arabian oil with its attacks on a critical pipeline and on vessels in the Red Sea.
The 10-year bond hovers near 5%, and the 30-year bond is at the highest level in nearly 20 years.
Advocates say a Fed hike would reassure the world that our central bank, with its new head Kevin Warsh, is serious about getting inflation down to its long-stated goal of 2%.
The idea that you control inflation by trying to up the cost of money is profoundly wrong.
The blunt truth is that manipulating interest rates is the wrong instrument to control inflation.
Believers in this fallacy assume that to get inflation down, one must depress economic activity.
They ignore that the very definition of inflation is reducing the value of a currency, usually, but not always, by creating too much of it.
This superstition is why the Fed has long had a bias against vigorous economic growth.
One is by announcing that henceforth the goal of monetary policy is a steady value for the currency, in this case the dollar.
To achieve stability, the central bank would increase or decrease the basic money supply until the desired level is achieved.
Money, after all, measures value the way scales measure weight, clocks measure time, and rulers measure length.
Yet central bankers and Treasury officials almost never mention currency exchange rates.
In fact, most economists and policy makers are wedded to floating exchange rates.
How about a floating clock? Everyone acknowledges that the current bump in prices mostly relates to Middle East turmoil.
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