Federal Reserve Rate Setting: Bankers Love It, But The People Don’t

That’s because of the Cantillon Effect, a 271-year-old economic observation about how money and pricing decisions move through the marketplace.

Raymond B. Jewell. Ph.D. | November 4, 2026

You’ve probably noticed that dinner costs more than it used to. Not a little more. A lot more.

Four years ago, when the Federal Reserve started raising interest rates to fight inflation, we were told the medicine was working. Eventually, inflation did slow down. The data showed progress. At his October 28 press conference, Federal Reserve Chairman Kevin Warsh pointed to improving inflation expectations as evidence of progress. He argued the signposts were moving in the right direction. Yet inflation remained elevated, and families were still paying prices substantially higher than four years earlier.

What the signposts don’t show is where you’re standing after four years. The national grocery price index has risen roughly twelve percent since 2022. That means prices are still higher.

Even though inflation slowed, prices didn’t come back down. The Personal Consumption Expenditures index tracks how quickly prices are rising today. It also records how much they’ve risen over time. But when policymakers celebrate slower inflation, they’re really saying prices are still going up—just more slowly. The family that absorbed four years of those increases is still absorbing the result. That’s not captured in any figure you’ll find in the post-meeting press release.

This disconnect between what the official data reports and what families actually feel is one of the oldest patterns in economics. An Irish-French banker named Richard Cantillon documented it in 1755, watching new money flow through the French economy and noticing something textbooks would spend three centuries ignoring.

New money doesn’t spread evenly.........

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