There is plenty of consternation about pandemic-related inflation. Should the Fed respond by increasing interest rates?
No. Inflation is caused by an excess of demand relative to supply. Raising interest rates will do nothing to increase the supply of anything; in fact, it could deter investment that would improve productivity and eliminate bottlenecks. As to demand, it is less driven by borrowed funds than by savings generated during the height of the pandemic and a diversion of spending from services to goods. How will increasing interest rates address those factors?
The bottom line is that we are dealing with a large number of temporary issues that will go away in time. It would be a mistake to overreact in the short run.