18.6 C
Munich
Wednesday, July 28, 2021

No Inflation Worries at the Fed

Must read

Raptors keeping options open heading in to draft

By Staff The Canadian Press Posted July 28, 2021 1:07 pm Smaller font Descrease article font size -A Larger font Increase article font size A+

Google’s Costs Have Catching Up to Do

Google’s great quarter may have been a little too great. ...

Federal Reserve Chair Jerome Powell speaking during the Federal Open Market Committee press conference on June 16.



Photo:

Federal Reserve

Let’s try one of those multiple choice questions we all hated on SAT tests. Question: Which of the following doesn’t fit with the others?

A) 7% GDP growth in 2021.

B) A 5% increase in the consumer price index from a year earlier, and 3.8% in core prices excluding food and energy.

C) A 4.5% unemployment rate by the end of this year, heading toward 3.8% next year.

D) A federal funds interest rate of near-zero for another two years.

If you answered D), you aren’t a member of the Federal Open Market Committee (FOMC), which on Wednesday reaffirmed its pedal-to-the-metal monetary policy despite a booming economy and rising inflation that even the Fed anticipates will be 3% this year.

Answers A) and C) are the median estimates of 18 Fed governors and regional bank presidents in June, while B) was the actual inflation figure for May. In any previous era, those numbers would be flashing yellow signals that some modest monetary tightening is in order.

But not under Chairman

Jerome Powell,

as once again there were no dissenters from the policy that began at the height of the pandemic in spring 2020. The one hint of change is that seven of the Fed forecasters predicted a rate increase in 2022. But that is only up to 0.25% (two members) or 0.5% (five). The median estimate is still no rate hikes through 2022 and only up to 0.6% in 2023.

Mr. Powell conceded that the recent jump in inflation had been higher than expected. He had little choice given the obvious price increases across most of the economy. But he dismissed this at his press conference as the result of “transitory supply effects” that will vanish when the “bottlenecks” do. Give him credit for stubborn consistency.

The chairman was also exuberant about unemployment. “We’re going to be in a very strong labor market pretty quickly,” he said, which is also hard to deny given the record 9.3 million job openings and employers across the country who can’t find workers.

All of this optimism is enough to make us wonder if Mr. Powell now thinks the economy can keep growing without any more of President

Biden’s

spending. Too bad no one asked.

Wonder Land: A crisis may be a terrible thing to waste, but the Manchin mess and spending spree show Joe Biden has found a way to waste the Covid crisis. Images: Everett Collection/Getty Images Composite: Mark Kelly

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the June 17, 2021, print edition.

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest article

Raptors keeping options open heading in to draft

By Staff The Canadian Press Posted July 28, 2021 1:07 pm Smaller font Descrease article font size -A Larger font Increase article font size A+

Google’s Costs Have Catching Up to Do

Google’s great quarter may have been a little too great. ...

Canada at the Tokyo Olympics: Who’s competing Wednesday night, Thursday morning – National

Canadian athletes will be busy competing in several events at the Tokyo Olympics Thursday, including the debut of golf and a chance for medals...