The Fed Needs to Stop Feeding Inflation

American families are already paying more for groceries, gas, housing, insurance, and everyday goods. The latest inflation report shows the problem is not over, and Washington should stop pretending cheaper money will solve a price problem caused by too much money.

Inflation Is Moving the Wrong Way Again

CNBC reported that overall inflation rose 0.6 percent in April and 3.8 percent over the last 12 months, the highest annual inflation reading since May 2023. Core prices, which strip out food and energy, rose 2.8 percent over the year.

Those numbers should end serious talk of near-term interest rate cuts. Inflation remains well above the Federal Reserve’s 2 percent target, and the trend is moving in the wrong direction.

CFE’s view is straightforward. Inflation is a monetary phenomenon. It happens when too many dollars chase too few goods and services. Energy shocks, tariffs, and war-related commodity pressure can raise specific prices, but the solution to persistent economy-wide inflation starts with tighter monetary policy.

The Fed Has Been Growing Money Too Fast

The Federal Reserve has allowed the money supply to grow faster than the economy can absorb. The M2 money supply grew from $20.8 trillion in June 2023 to $22.7 trillion in March 2026, an increase of 9.1 percent in fewer than three years.

That should concern every family trying to keep up with rising costs. More dollars in the economy do not create more affordable goods and services by themselves. When money growth outruns real economic capacity, the result is upward pressure on the general price level.

The Federal Reserve should stop treating rate cuts as the next obvious step. Lower rates would risk adding more fuel to an inflation problem that has not been solved.

Core Prices Show This Is Not Just Gasoline

The Iran War has pushed energy and commodity costs higher, and families feel that quickly at the pump and in utility bills. Tariffs are also raising costs by taxing imports, shielding domestic producers from competition, and making everyday goods more expensive.

Those are relative price problems. They explain why some goods and services become more

expensive than others.

They do not explain away the broader inflation problem. Core prices rose 2.8 percent over the last year even after removing food and energy. That shows inflation is not simply an energy story or a war story.

Washington has two jobs here. The Federal Reserve needs to tighten monetary policy, and elected officials need to stop making relative prices worse through tariffs and other policies that raise costs for consumers.

The Fed Should Put Rate Hikes Back on the Table

The Federal Reserve should stop cutting interest rates and make clear that rate hikes remain on the table if inflation continues to rise. Price stability requires discipline, not wishful thinking.

The Fed should also resume aggressive balance sheet reduction. Its current balance sheet remains enormous, with the latest Federal Reserve release showing reserve bank credit of roughly $6.7 trillion and securities held outright above $6.4 trillion.

Shrinking the balance sheet was part of the early 2020s inflation fight. The Fed should return to that approach now. A larger balance sheet keeps too much liquidity in the system, and too much liquidity makes it harder to bring inflation down.

The point is not to punish growth. The point is to protect purchasing power. Families cannot plan, save, invest, or build when the dollar keeps losing value.

Stagflation Risk Is Real

The word “stagflation” should not be thrown around lightly, but the risk is now impossible to ignore. Inflation is rising again while tariffs, energy shocks, and global instability are putting pressure on growth.

That combination is dangerous. Monetary inflation erodes purchasing power. Tariffs raise consumer costs and business input prices. War-related energy pressure makes transportation, production, and household budgets more expensive.

America does not need a repeat of the policy mistakes that turn temporary pain into lasting damage. The Fed should focus on price stability, and Washington should remove policy barriers that make goods and services more expensive.

CFE Takeaway

Inflation is not beaten. Overall prices rose 3.8 percent over the last year, core prices remain elevated, and the M2 money supply has grown 9.1 percent in fewer than three years.

The Federal Reserve should stop cutting interest rates, put rate hikes back on the table, and resume aggressive balance sheet reduction. Congress and the administration should also stop making relative prices worse through tariffs and other cost-raising policies.

Families need a stronger dollar, lower costs, and a central bank willing to finish the inflation fight.