Investors and analysts are growing more worried about inflation, but officials at the U.S. Federal Reserve – the agency charged with keeping inflation controlled – are not sharing those anxieties and instead continue to insist that any sudden rise in prices will be small and short-lived.
Some Fed officers even seem to welcome what inflation might offer, The New York Times reported.
“You talk about the economy overheating, you kind of go, ‘Gosh, I like the economy producing as much as it can,’” Charles Evans, president of Chicago’s Federal Reserve Bank, said last week in a call with reporters quoted by the NYT.
“Why would you like unemployment to be higher when it could be lower?” he said. “It depends on what the added cost is.”
The Fed has set 2 percent as an acceptable inflation rate, but it has said repeatedly that it would let inflation surpass that mark slightly for short periods to strengthen prices after years of meager gains.
Fed officials also have downplayed recent, broad price jumps, attributing them to supply-chain glitches that will untangle themselves as the economy recovers.
Recent global spikes that have set record prices for everything from palladium to lumber (see related stories) are “likely to prove temporary,” Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a 5 May speech quoted by the NYT.
“Toilet paper and Clorox were in short supply at the outset of the pandemic, but manufacturers increased supply and those items are no longer scarce,” he said.
“At this point, the risk that inflation remains persistently above our long-term goal of 2 percent still appears small,” Fed governor Michelle Bowman agreed in remarks released 5 May.
“If there are unforeseen upward pressures on prices, we will use our tools to bring it down,” Richard Clarida, the Fed’s vice-chair, said in a 5 May CNBC interview.
Meanwhile, the Fed has stated its intention to hold a steady policy course, keeping interest rates near zero while it buys $120 billion a month in government and corporate bonds.
It will not alter those policies until the economy reaches full employment and inflation has not only exceeded 2 percent but shows evidence of remaining there for an extended period, Fed chair Jerome Powell and other central bank officials have said on several occasions.
“We’re still a long way from our goals, and in our new framework we want to see actual progress, not just forecast progress,” Clarida noted.
“As we move through the year, we’ll get more data,” he said.
TREND FORECAST: To clearly illustrate Fed hype, with commodity prices and consumer goods spiking, Eric Rosengren, president of the Federal Reserve Bank of Boston, could only see as far as “toilet paper and Clorox” and was delighted “manufacturers increased supply and those items are no longer scarce.”
Prices will keep rising and inflation will keep climbing, which will force the Fed to reverse policy quickly, halting its bond-buying scheme while raising interest rates… which will, in turn, tank equity markets and sink the nation into the “Greatest Depression.”
