2023-08-25 21:56:39
Jerome Powell, America’s chief inflation fighter, has a clear message for his audiences in Jackson Hole’s climatic spa and the rest of the world: the job is not yet done. Core inflation, which removes fluctuating energy and food prices, hasn’t moved much lower.
The prices for services, which after all account for half of the inflation indicator used by the Fed, have even climbed again recently. There are also indications from the real estate market that the restrictive monetary policy with 11 interest rate increases within 17 months has not yet had the dampening effect that the Fed had desired and expected.
Fed is based on the stars
Powell’s honesty, who makes no secret of his insecurity, is sympathetic. The old models that the central bankers use to calculate economic development do not really match reality.
In Powell’s speech, the astonishment that the pace of growth had actually picked up slightly recently, instead of slowing down as would have been expected given the tight interest rate, was evident in Powell’s speech. It is also unusual that unemployment is not rising, even though key interest rates have been pushed to their highest level in more than 20 years.
Finally, it is unclear to the central bankers how long the monetary policy measures will take effect. It could be that the true effect of the big tightening is yet to be seen, Powell speculates. Or not. The Fed chief emphasizes that the Fed’s navigation is based on the stars.
Winand von Petersdorff Published/Updated: , Recommendations: 12 Gerald Braunberger Published/Updated: , Recommendations: 16 Christian Siedenbiedel Published/Updated: , Recommendations: 3 Peter Carstens, Berlin Published/Updated: , Recommendations: 19
Unfortunately, the sky is overcast. That is, one moves “by sight” until a star shines brightly. Applied to the Fed, this means that it evaluates all available and relevant data in order to make well-founded decisions. But one thing is pretty clear: inflation is far from over.
#Inflation #defeated