{"id":54446,"date":"2020-07-29T08:22:33","date_gmt":"2020-07-29T13:22:33","guid":{"rendered":"https:\/\/olduvai.ca\/?p=54446"},"modified":"2020-07-29T08:22:36","modified_gmt":"2020-07-29T13:22:36","slug":"did-the-fed-just-unwittingly-light-the-spark-towards-13-inflation","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=54446","title":{"rendered":"Did the Fed Just Unwittingly Light the Spark Towards 13% Inflation?"},"content":{"rendered":"\n

Did the Fed Just Unwittingly Light the Spark Towards 13% Inflation?<\/a><\/h3>\n\n\n\n
\"fed<\/figure>\n\n\n\n

The Fed just announced a major shift in its approach to inflation, and the move is not getting nearly the attention that it deserves. That is, of course, unless you don\u2019t mind inflation moving higher than any other time in recent memory.<\/p>\n\n\n\n

Writing for ThinkAdvisor, Tim Duy, senior director of the Oregon Economic Forum at the University of Oregon, explains<\/a> the potential for the upcoming shift:<\/p>\n\n\n\n

Having learned a hard lesson in the last recovery \u2014 don\u2019t tighten monetary policy too early \u2014 the central bank is leaning in the opposite direction. In practice, that means the Fed will not just emphasize actual inflation over forecasted inflation, but will also attempt to push the inflation rate above its 2% target. It\u2019s a whole new ballgame.<\/p><\/blockquote>\n\n\n\n

The Fed has already come close<\/a> to \u201coverheating\u201d the economy in the past, and just last year, started to let<\/a> inflation \u201crun hot.\u201d<\/p>\n\n\n\n

Thanks to the pandemic, the \u201cofficial\u201d rate of inflation has cooled off a bit this year. But now, it appears the Fed\u2019s own Governor Lael Brainard sees inflation as unbalanced, with the only solution being to offset that imbalance and focus.<\/p>\n\n\n\n

Here\u2019s how the Fed is setting the stage for rising inflation again\u2026<\/strong><\/h2>\n\n\n\n

Brainard made this fairly clear in recent commentary captured<\/a> on Robert Wenzel\u2019s Economic Policy Journal:<\/p>\n\n\n\n

Brainard pointed out that \u201cresearch suggests that refraining from liftoff until inflation reaches 2% could lead to some modest temporary overshooting, which would help offset the previous underperformance.\u201d<\/p><\/blockquote>\n\n\n\n

Wenzel provided an analogy to illustrate the situation, writing: \u201cThis type of goose-inflation policy action is the equivalent of the early 20th-century medical practice of prescribing smoking to treat asthma.\u201d<\/p>\n\n\n\n

You can see the official<\/a> CPI inflation for the U.S. illustrated below, before<\/em> much (if any) change in Fed policy has taken place:<\/p>\n\n\n\n

\"cpi<\/figure><\/div>\n\n\n\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

Did the Fed Just Unwittingly Light the Spark Towards 13% Inflation? The Fed just announced a major shift in its approach to inflation, and the move is not getting nearly the attention that it deserves. That is, of course, unless you don\u2019t mind inflation moving higher than any other time in recent memory. Writing for […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[18769,124,426,3650],"class_list":["post-54446","post","type-post","status-publish","format-standard","hentry","category-economics","tag-birch-gold-group","tag-central-banks","tag-inflation","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/54446","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=54446"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/54446\/revisions"}],"predecessor-version":[{"id":54447,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/54446\/revisions\/54447"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=54446"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=54446"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=54446"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}