The Federal Reserve raised interest rates by three-quarters of a percentage point to fight inflation, even as the economy began to slow. This follows a move of a quarter point in March, another half point in May and three quarter points in June. The Fed also signaled in its post-meeting statement that more rate hikes are coming, likely in September, saying it “expects that continued increases in the target range will be appropriate.”

It’s crazy, friends. The Fed tries to put out a fire in the living room while the forest is on fire. Inflation erupted all over the world. It happened because of pent-up demand from more than two years of the pandemic. And limited supplies of everything from computer chips to wheat, due to difficulties in running the global economy, as well as Putin’s war in Ukraine which is driving up global energy and food prices, and of China’s COVID-19 lockdowns.

Big companies, on the other hand, raise their prices because they can. Consumers have little choice due to record levels of corporate concentration, and rising supply costs have fully covered businesses.

The Fed’s fire hose doesn’t touch any of that.

Meanwhile, apologists for big business and the Fed say the labor market is doing well. Waste. The labor market has two aspects: jobs and wages. Jobs increased but hourly wages fell in real terms (adjusted for inflation). so called “salary increases” have not come close to offsetting all the price increases. There is no trace of the old “wage price inflation” discussed in macroeconomics textbooks.

If the Fed keeps up the pace – even if the domestic economy avoids an official “recession” — most workers will fall even further behind.

The standard of living of almost everyone who borrows money (that is, everyone except the super-rich, who can borrow at floor rates because they use their wealth as collateral) is already in decline. decrease. The average rate on credit card debt rose to 17.25% (from 16.34% in March, before the Fed began its rate hikes). Student loan, auto loan and mortgage rates are also up from a year ago.

Inflation is a problem – but we can deal with it much better, and without placing such a huge burden on the bottom 80% of Americans by income. We should do it with a temporary windfall tax on oil and food companies, temporary price controls on pharmaceuticals, more aggressive enforcement of antitrust laws, a tax on stock buybacks and higher taxes for rich.

Robert Reich, former United States Secretary of Labor, is a professor of public policy at the University of California at Berkeley and author of “The system: who rigged it, how we fix it.” Learn more about Robert Reich at https://robertreich.substack.com/.