A draconian approach to Fed policy could exacerbate the problems facing the economy.

• The Federal Reserve has been urged by economists to implement stricter policies, including increasing interest rates by half a point in March.
• It is appropriate for the central bank to adopt a cautious strategy in normalizing interest rates given the recent rise in inflation data.
• Despite drastic inflation-cutting measures, the chip shortage and early retirees due to the pandemic remain key issues hindering the economy.

James Bullard, Ethan Harris of Bank of America, and Goldman Sachs are all advocating for a more aggressive move by the Fed to combat inflation.

The inflation data has been the worst in 40 years, as we have repeatedly heard.

Some are suggesting that inflation is becoming a permanent fixture in our economic landscape. However, nothing is set in stone.

Some suggest that the Fed must adopt a draconian approach, similar to Volcker's, to stop price increases, as it is currently "behind the curve."

The Fed has considered raising rates by a half-point at the next meeting and by another quarter-point at every subsequent meeting.

The desire to end the central bank's bond-buying program, known as quantitative easing, is shared by many, but they want it to happen immediately.

In addition to allowing their bond holdings to mature, they want the Fed to sell those bonds immediately to reduce their nearly $9 trillion balance sheet. This task must be accomplished while running trillion-dollar deficits.

I agree with the Federal Reserve's plan to normalize interest policy, but I think the inflation concern is still too excessive.

Higher prices aren’t the only problem

Can you clarify how increasing interest rates and reducing the Fed's balance sheet will address the issues at hand?

1. The shortage of computer chips has led to a decrease in the supply of various goods, including new cars and household appliances, resulting in recent price increases.
2. To meet the current housing demand, it is necessary to create more than 5 million new housing units.
3. To reduce the cost of raw materials, which have been increasing due to non-monetary factors such as tariffs or artificial supply constraints, many companies are exploring alternative sourcing options or seeking to negotiate better deals with suppliers.
4. The high cost of shipping, the shortage of thousands of truck drivers in the U.S., and the rising energy prices, which are increasing due to geopolitical risks rather than increased demand.
5. To address the challenges of child care and bring back more than 3 million early retirees, we need to find a solution that will enable more than 1 million women to re-enter the workforce and raise more than 900,000 people in the U.S. from the dead.
6. To increase the population, which has grown by the fewest number of people since the beginning of the republic in 2021, lift immigration controls. Additionally, to raise the birthrate, which is at a nearly 100-year low, boost immigration.
7. To end the pandemic, the remaining portion of the U.S. population that is at risk of contracting Covid must be vaccinated.

If prices do not decrease, consider raising interest rates to induce a market crash or recession, thereby lowering prices.

The excess savings that were once expected to support the economy for years have now decreased significantly compared to normal levels.

Government support measures boosted the personal savings rate to nearly 35%, but it has since dropped below 8%. Recent retail sales data indicates that the money is being spent.

Those at the bottom quartile of the income distribution will soon have to return to living paycheck-to-paycheck as there is no "Build Back Better" money coming.

Let's talk again in the fall after you get aggressive.

— Ron Insana is a CNBC contributor and a senior advisor at Schroders.