The Fed Finds Itself on the Business End of Inflation Expectations

                                                           

It has been four and half months since Fed chair Jerome Powell told us that the current bout of high inflation would be transitory.      September 15, 2021   Today's Top Stories From the Breitbart News Desk It has been four and half months since Fed chair Jerome Powell told us that the current bout of high inflation would be transitory. Initially, Powell had the unanimous support of his fellow Fed officials. But lately the facade of unity has started to crack, with officials such as Cleveland Fed president Loretta Mester saying she thinks they underestimated the strength of inflation. We've been arguing for months that the Fed was, at the very least, underestimating the risk that inflation would run hotter for longer. So where do things stand now? On the side of Powell and Team Transitory, this week produced several pieces of evidence. The Consumer Price Index came in slightly below expectations on a monthly basis, and hit the forecast for a cooling off on the annual basis. The Labor Department's report on import prices showed those falling 0.3 percent, the first decrease since October 2020. Wage gains outpaced price gains for the first time in recent memory in August, producing a slight month-to-month uptick in real wages. Team Persistent Inflation, however, had scored several points in its favor this week. On Monday, the New York Fed reported that consumer inflation expectations rose to a record high. On Wednesday, the Atlanta Fed reported that business inflation expectations also rose to a record high. If inflation expectations matter as much as Fed officials claim, this is pretty powerful evidence that inflation is going to stick around for a while. Why does the Fed think inflation expectations matter so much? According to economic theory, companies and households take into account the expected rate of inflation when making economic decisions, such what wage to demand for labor or what to price a good or service. The combination of these decisions influences the price level. So, in a sense, inflation expectations become a self-fulfilling prophecy, according to the theory. Given that this is the predominant view of Fed officials, the upward movement in expectations is going to make it harder to stick to the "transitory" narrative. In order to bring expectations back in line with the Fed's target of 2 percent annual inflation, the Fed will probably have to announce a tightening at the coming September meeting or the November meeting. Waiting until December, in the midst of holiday shopping, would be very risky. – Alex Marlow & John Carney Breitbart News Network     TOP STORY   No Sign of Transitory: Business Expectations for Inflation Climb to Fresh High American businesses' expectations of future inflation hit a record high last month, according to a report released Wednesday from the Federal Reserve Bank of Atlanta, potentially undermining confidence among Fed officials that inflation pressures will ease over time. The Atlanta Fed's survey of U.S. businesses found that inflation was expected to be runing at a rate of 3.1 percent 12-months from now, one-tenth of a point higher than the previous month's survey. This is the highest expected rate of inflation in data running back to 2012. The long-term average for this series is 2 percent. [Click here for more]   IN OTHER STORIES... Biden's Bummer Summer: August Industrial Output Gains Slow to 0.4% WASHINGTON (AP) — U.S. industrial production slowed to a 0.4 percent gain in August as shutdowns of petroleum refineries and petrochemical plants caused by Hurricane Ida curbed manufacturing activity. Plant closures long the Gulf Coast as well as lost oil production during last month's hurricane shaved 0.3 percentage points from output, the Federal Reserve reported... [Click here for more]   Mitch McConnell Not 'Bluffing' on Republican Debt Ceiling Stand Senate Minority Leader Mitch McConnell (R-KY) said Tuesday he is not "bluffing" on Senate Republicans' stand on the debt ceiling. McConnell told Punchbowl News that Republicans will not help the Democrat-controlled Congress raise the debt ceiling, which is required for the government to continue operating alongside a bill to fund... [Click here for more]   Bidenflation Cranks Up to New Record High in Empire State Manufacturing Survey A record share of manufacturers in New York state raised prices for their products in early September, a survey released Wednesday showed. The New York Fed's Empire State index of prices received rose to 47.8, reflecting 50.4 percent of manufacturers saying they raised prices in the month and 2.6 percent saying their prices were... [Click here for more] FOLLOW   Did you receive this email from a friend? Sign up to receive Breitbart Business Digest. ©2021 Breitbart News 149 S. Barrington Ave. #401 Los Angeles CA 90049 USA Want to change how you receive these emails? You can *update your preferences or *unsubscribe from this list.  Subscription Information This message was sent to  Webmaster220 Bible Study Blog *the blog owner has deleted the hyperlink intentionally