Top Federal Reserve officials say they misread inflation and now plan to correct the course

Sharing is Caring!

Full Article

Treasury Secretary Janet Yellen also acknowledged the misdiagnosis coming from her own department, and that of current Fed Chair Jerome Powell.

“Both of us could have probably used a better word than ‘transitory,'” she told senators in June when asked about their remarks about inflation last year and their slow response to price pressures.

Top officials at the Federal Reserve were seeing inflation data come in very hot for months before policymakers moved to wind down monetary policies that were stimulating the economy.

It’s the Fed’s task to tame inflation that is running at a pace not seen in four decades. To do so, it has been hiking interest rates at a fast pace.

Reining in inflation may take more aggressive monetary policy moves than the central bank has embraced in recent years, according to economists like Judd Cramer. His research indicates that the Fed may need to hike rates to levels not seen in decades to force rising prices into retreat.

See also  Supply Chain Crisis and Inflation

“If inflation is going to be high and remain higher, that means that the neutral rate in the economy is also going to be higher because the price of goods are going up,” he said to CNBC.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.