Fed's Powell should say do more, say less and be more modest
The
Although inflation, as measured on a year-over-year basis by the consumer price index, declined from its 9.1.% June peak to 7.7% in October, the Fed continues to confront tough structural challenges.
The Russian invasion of
Yet Chairman
Since
The fundamental problem is that the Fed can’t know where it is going next month or year without a clear picture of where inflationary pressures will persist or subside. And the institution is simply not any better than private economists or armchair pundits at anticipating wars, weather patterns or the machinations of autocrats.
When inflation was less than the Fed’s 2% target, then-Chairman
The year-over-year rate of increase in the CPI went from 1.4% to 5% from January to
As noted, inflation peaked at 9.1% in June. A year earlier, household and bond market conditions were forecasting 4.8% and 2.1%.
Dart boards are better, yet Fed policymakers talk about expectations every chance they get.
Likely, she’s more influenced by what
In the statement released after the
Taking that as a sign that the Fed will soon ease back from its pace of tightening, stock prices jumped. A few hours later,
I can’t think of what possessed him to put that language in the statement if he was going to walk it back. A culture has developed where market hangs on every utterance of Fed officials, and often those are contradictory.
On
No wonder
Most recently, CPI inflation has trended down but much of that has been energy prices, which have been strongly influenced by
Subtracting energy from the CPI, inflation has not abated. It was 6.6% in June and 7.0% in October, and labor markets remain tight.
With supply-side factors beyond monetary policy’s influence contributing so much uncertainty to the inflation outlook,
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