How Should the Fed Respond to the Highest Inflation in 40 Years?

Inflation over the past 12 months has been 6.9% as measured by the CPI. This is the highest headline inflation reading since the early 1980s. Stripping out food and energy yields a core CPI inflation rate of 5.0%, which is the highest reading of that measure since 1991. Over the same time period, unemployment has fallen from 6.7% to 4.2%. Although higher than its value pre-Covid (3.5%), this is among the lowest levels of unemployment the U.S. economy has ever experienced.

So, what should the Fed do about this?