Yahoo Finance: Inflation data arrives at critical moment for Fed after bank failures, jobs data..

[progree]

4. Yes, I think that he's Chair of the FOMC and that they try to reach consensus (but often don't)

Last edited Mon Mar 13, 2023, 11:02 PM - Edit history (1)

means he has some influence on the others, in my mind. But I really don't think, and I haven't seen, read, or heard that any of the other FOMC members are opposed to the rate hikes, some just differ on the exact size of the rate hikes.

All's I've been hearing -- from between when the hot inflation reports and retail sales reports came out in mid-February, and until the Silicon Valley Bank became news -- was various FOMC members making hawkish noises about larger rate increases. Maybe they are just sucking up to Powell, but I really don't think so.

I very strongly believe that fighting inflation is NOT just a Powell thing. Even at the current about 4.5% level (see the rolling core PCE graphs), it is more than double the Fed's 2% inflation target. They long have had that target, and no serious person thinks it's there just for shits and giggles, and that they are going to say, well, it might hurt the economy if we try to do something about it, so we better just let inflation roar. So what if the purchasing power of the dollar is cut in half in 10-20 years (At 4.5% inflation, it would take 16 years for the purchasing power of the dollar to go down to 50 cents. At the peak 9% inflation last June, it would take just 8 years to cut the dollar in half). I don't think that any of them think 4.5% inflation is no big deal, and I don't think anyone at the cabinet level and above thinks that way either.

I find it unacceptable as to what inflation is doing to the purchasing power of my nest egg, for one (I'm retired). As for workers, I've never known a period when wages have kept up with prices during times of serious and rising inflation. So inflation isn't a good deal for them either.

And unlike the stock market, purchasing power never recovers. It always stays down, and goes down some more. For there to be a "recovery" in purchasing power, there would have to be sustained DEflation, and that would only occur if there was a very serious prolonged multi-year deep recession. And obviously we don't want that.

As for raising interest rates as the tool to fight inflation, that's what they have always done, and it has worked, although too often causing a recession to do so. That's where I think we're headed, again.

I know there is a huge DU chorus about how inflation is different this time -- it's an international issue this time (and in the past too I might add), supply chain, Ukraine, Long Covid, and I forget what else -- and raising rates increases business's costs and mortgages etc. -- and so raising interest rates is neutral to counter-productive in bringing down inflation. All that may be true, but I see no evidence that any FOMC members or anyone in the Biden administration think so.