Can the Fed Fight Inflation with Negative Real Rates?

We’re seeing some strange things happening within the bond market with a steeply inverted yield curve on one hand, while we also have real negative interest rates from the Federal Reserve. The Fed claims they’re trying to fight inflation, but we’ve got a whole camp of people saying we cannot fight inflation with negative real interest rates, you must be above the inflation rate before it has any effect. I’m going to show you today, something that might be a little bit surprising. That we don’t need positive real interest rates to combat inflation. In fact, with negative real interest rates you can cause deflation.