(Reuters) – U.S. Federal Reserve Chair Jerome Powell on Friday said he remains unconvinced that current high inflation readings will turn out to be permanent, pushing back against a growing number of his more hawkish colleagues publicly fretting about price pressures.
While recent inflation readings are “a cause for concern,” Powell told the Kansas City Fed’s annual Jackson Hole economic symposium, they are more than likely to recede, and responding by tightening monetary policy would be a “harmful mistake.” The remarks appeared calibrated less to an argument against tapering the Fed’s asset purchases and more to make the case against raising interest rates soon after. Indeed, Powell chose the speech to acknowledge that, at least as of last month’s policy meeting, he supported the Fed’s reducing its $120 billion in monthly asset purchases this year, with inflation already meeting the bar to do so, and further progress on the employment front expected. But to raise rates the Fed has said the economy must meet a more stringent test, including not only maximum employment but also inflation that has reached and looks on track to exceed 2% for some time. “Time will tell whether we have reached 2% on a sustainable basis,” Powell said.
In the 12 months through July, the Fed’s preferred measure of inflation – the core PCE price index – rose 3.6% after a similar increase in June, data Friday showed; on a monthly basis, the gain was the smallest in five months.
Powell’s defense of his “temporary” view on inflation drew swift criticism from some quarters, with Harvard University’s Jason Furman saying that while it was an “excellent and coherent case,” Powell was “failing to take seriously any arguments on the other side.” Here’s Powell’s 5-point rundown on why he isn’t perturbed: Nick Note: the dumbest most idiotic statement ever made by a central banker is “inflation is not a problem” Before the fat lady sings he will deeply regret those words. And so will everyone buying into these bubble bond, real-estate and stock-market.