I think we're just going to keep inflating our way out of this mess... and, um, it's what we'll do again this year.View on YouTube
By late 2022, U.S. policymakers—especially the Federal Reserve—had shifted decisively away from monetary expansion and toward aggressive monetary tightening, contradicting Friedberg’s expectation that they would "keep inflating our way out" for at least the coming year.
Key facts:
-
Rapid interest-rate hikes instead of keeping money easy. In March 2022 the Fed began raising the federal funds rate from near zero and kept hiking throughout 2022, reaching 4.25%–4.50% by the December 14, 2022 meeting—the fastest tightening cycle in decades, explicitly to fight inflation rather than tolerate it.
- A Forbes summary of FOMC moves shows rate increases at every meeting from March through December 2022, taking the target range from 0.25%–0.50% in March to 4.25%–4.50% in December. (forbes.com)
-
End of QE and start of quantitative tightening (QT), not ongoing balance-sheet expansion. Official summaries and Congressional Research Service analysis note that:
- The Fed tapered its asset purchases starting November 2021 and ended new purchases in March 2022.
- In June 2022 it began reducing its balance sheet (QT) by allowing capped amounts of Treasuries and mortgage-backed securities to roll off each month—directly reversing the earlier monetary expansion. (congress.gov)
-
Policy goal shifted from “inflating away” problems to disinflation. Fed communications throughout 2022 framed the priority as restoring price stability, not using inflation to ease debt burdens. The late‑2022 rate level (4.25%–4.50%) and ongoing QT are characteristic of restrictive policy aimed at slowing demand and lowering inflation, not “continuing to inflate our way out.” (forbes.com)
While it’s true that there were no dramatic, sudden cuts in federal spending over that period, the core of Friedberg’s prediction was that U.S. policymakers would continue to rely primarily on monetary expansion and tolerance of inflation rather than sharply raising interest rates. In reality, 2022 featured a sharp pivot to monetary tightening and disinflation, so the prediction did not hold.