'The Political Science Association of Kasetsart University'
Abstract
The COVID-19 pandemic prompted governments worldwide to implement a range of measures to mitigate the socioeconomic consequences of the crisis. In the United States, the Federal Reserve and the federal government deployed substantial fiscal stimulus and monetary policy interventions to support businesses, individuals, and the overall economy. This study examines how these actions have contributed to the inflationary trends observed today. Drawing from the comprehensive review of academic literature, economic reports, and policy documents, this research investigates the relationship between Federal stimulus and Federal Reserve monetary policy during the COVID-19 pandemic and the emergence of inflationary pressures. Findings from the analysis suggest that while Federal stimulus and monetary policy initiatives were crucial in mitigating the immediate economic downturn caused by the pandemic, they have also contributed to the current inflationary environment. The injection of substantial fiscal stimulus, including direct payments, enhanced unemployment benefits, and business loans, increased aggregate demand, potentially fueling price increases across sectors. Furthermore, the Federal Reserve's accommodative monetary policy, characterized by near-zero interest rates and large-scale asset purchases, aimed to support financial markets and stimulate borrowing and investment. This study acknowledges that other factors, such as global supply chain disruptions, pent-up consumer demand, and commodity price fluctuations, have also influenced the current inflationary environment. Nevertheless, the research findings highlight the role of Federal stimulus and monetary policy in exacerbating inflationary pressures. The study concludes by emphasizing the need for policymakers to balance economic support measures with inflation containment strategies carefully
