Chairman Powell’s Bizarre Statement Ignores the Reality of Price Inflation
Inflation has been on the rise since late 2015. According to the Consumer Price Index (CPI) measure, the Fed has typically maintained the “target inflation” rate of 2%.
But official inflation has moved well past that benchmark. It is currently nearing 3% while rising at a consistent and alarming rate (see chart below):
During strong economic growth, this inflationary cycle is common. And if you look only at the numbers on their surface, the illusion of a strong economy is what someone would see.
But all that changes once you look behind the curtain…
The economic outlook is uncertain at best with trade wars, a declining dollar, and a credit market suspiciously following a script from 2008.
And the U.S. economic woes don’t stop there. Corporations are adding to the troubles with what seem to be an act of sleight of hand with certain tax loopholes.
All of these challenges to what appears to be a “strong” economy can bring it crashing down like a pile of bricks.
But despite all this, Fed Chairman Powell delivered a speech on August 24 that contained a disturbing “Wizard-of-Oz”-like message.
“Pay No Attention to the Inflation Behind the Curtain”
Sometimes you have to wonder whether the Fed isn’t telling us something about inflation, or if they’re simply ignoring reality altogether.
Case in point: during the speech delivered by Chairman Powell, he made a rather odd statement (emphasis and paragraph breaks ours):
When longer-term inflation expectations are anchored, unanticipated developments may push inflation up or down, but people expect that inflation will return fairly promptly to the desired value. This is the key insight at the heart of the widespread adoption of inflation targeting by central banks in the wake of the Great Inflation.
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