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Inflation: What Can We Expect?

Eurovision Wetten Sports2022-12-06 15:46:04【Science】2people reading

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The latest rise in inflation to 4.2% for April 2021 has fueled expectations that the Federal Reserve could raise interest rates and tighten monetary policy. The rise in the consumer price index for all items is the largest increase in 12 months since a 4.9% rise in September 2008, the U.S. Bureau of Labor Statistics (BLS) reported earlier in the year. this month.In recent times, the Federal Reserve has been willing to adapt to higher inflation, but that attitude could change with the unexpected pace of price increases in the latest data. "The Fed has given pretty clear and strong signals over the past year that it will not be deterred by signs of inflation and that it will follow an accommodative monetary policy and keep interest rates low," Wharton Finance said. Professor Itay Goldstein in an interview on the Wharton Business Daily radio show on SiriusXM. (Listen to the podcast at the top of this page).That position could now change, as the April inflation data was "quite alarming," Goldstein continued. “Nobody expected inflation to be that high. So now we're starting to have more expectations that maybe the Fed will eventually act and raise interest rates and tighten monetary policy. ”The Fed Funds target rate serves as a benchmark for bank interest rates and is currently in in the range of 0% to 0.25% The Federal Reserve has said it expects to keep benchmark interest rates close to zero until 2023.Wharton finance professor Jeremy Siegel said the Fed may have no choice but to raise interest rates. Siegel has spoken about the threat of rising inflation over the past year, including on the Behind the Markets show that he co-hosts on SiriusXM and in other media interviews. "We could have significant inflation in 2021 and 2022, which would result in a cumulative increase of around 15% to 20% in the price level," he said. “We will not have the chronic inflation of the 1970s. The Fed will be forced to raise interest rates. [President Joe] Biden's stimulus, in addition to last year's stimulus and monetary expansion, created a serious inflationary situation. But the economy will remain strong. ""The Fed will be forced to raise interest rates." - Jeremy SiegelExplaining a possible shift in the Fed's approach, Goldstein pointed to recent comments from Fed Chairman Jerome Powell that the central bank is not necessarily targeting 2% inflation, but wants an average of 2% a the long of the time. The Fed is looking at "a wide range of financial conditions," rather than a single measure, Powell said in a March 2021 interview with the Wall Street Journal."[Powell's comments] indicated that even if [inflation] temporarily moves above 2%, we will not change monetary policy," Goldstein said. "So the expectation was that the Fed would stick with it and keep interest rates low and monetary policy relaxed."Space to squeezePowell had kept the door open to tighten monetary policy if necessary. “If conditions do change materially, the [Fed’s rate-setting] committee is prepared to use the tools that it has to foster achievement of its goals,” Powell said in the Wall Street Journal interview.Later in April, Powell reiterated in a letter to Republican Sen. Rick Scott of Florida that the Fed would intervene if inflation remained above 2% for an extended period, Reuters reported. "As progress toward our employment and inflation targets slows, we will be very accommodative for longer," Powell wrote in the letter. "On the contrary, if progress turns out to be faster, adjustments in policymaking are likely to come sooner."While the pace at which inflation grew in April surprised economists, many had warned that price increases would follow the government's COVID-19 stimulus programs and Federal Reserve interventions.As of March 2020, nearly $ 10 trillion in coronavirus relief programs have been launched between the Trump administration and the Biden administration. They include a $ 2.2 billion CARES program as of March 2020, a $ 900 billion program in December 2020, and three Biden administration programs totaling more than $ 6 billion.April saw strong price increases across the board, except for energy. The used car and truck consumer price index increased 10%, which was the largest monthly increase since the series began in 1953, and accounted for more than a third of all items, seasonally adjusted, according to the BLS. . Other indices that "had a major impact on the overall increase" included food, lodging, airfare, recreation, auto insurance, and household items and activities.Inflationary trends have also challenged the wisdom of the market at other key times. "[After] the 2008 crisis and all the stimulus and quantitative easing that followed, there was always a concern that inflation would skyrocket as a result," Goldstein said. "And none of that happened, we had no inflation." The inflation rate in the US had risen from 1.3% in October 2006 to 5.6% in July 2008, before falling even faster to -2.1% in July 2009; Since then, it has largely remained below 3%, according to BLS data."Now everyone is waiting [waiting] to see what will happen, whether it is a temporary change or more persistent." - Itay GoldsteinThis time, expectations were that the economy could absorb the coronavirus stimulus money and that "we may not be in real danger of inflation," Goldstein said. He noted that while the United States has had its inflationary bouts in the past, "it has been a long time" since it last happened."There was a debate, [where] people who thought we weren't going to see inflation prevailed for a while, but then the new data was definitely a big shock," Goldstein said. "Now everyone is [waiting] to see what will happen, whether it is a temporary change or more persistent."A period of adjustmentThe way inflation has played out in past events may not be related to its behavior during the coronavirus crisis, which is "quite different" from the 2008-2009 financial crisis, Goldstein noted. “At this moment there are important imbalances between the supply and demand of different goods. For one thing, you have a pent-up demand for cars and travel and the like. On the other hand, due to various frictions in the supply chain and contracting, problems with the supply are seen. And [those problems] drive prices up. Plus, it has all the monetary and government stimulus, and that can drive some inflation. "Goldstein described the current moment as "a period of adjustment" on multiple fronts, including the supply and demand of goods and the prices of goods, and the labor market. The latest employment report for April showed an increase of 266,000 jobs, much less than expected. He noted that some policies introduced during the pandemic are "inducing people to stop working," such as direct money transfers and expanding unemployment benefits. Other factors are also hampering more employment: "We still don't have a full personal education in many places, which limits parents and their flexibility to work."Above all, there is constant uncertainty about the direction and pace of the pandemic. "Are we really out of the woods and are we able to move on?" Goldstein asked. "All of this is still up in the air, and it shows in various data such as prices and unemployment that are extreme and surprising in many ways."

Inflation: What Can We Expect?

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