Fed Denial

Jim Picerno has a great post over at The Capital Spectator, noting:

“OPEC and the Federal Reserve don’t have much in common, although they both traffic in a comparable form of denial.”

First, consider yesterday’s Federal Open Market Committee statement, which claimed that “long-term inflation expectations appear to have remained well contained” and that “the risks to the goal of price stability have moved into balance.”

Contained? Balance? By what measure? Granted, inflation per se looks fairly benign by way of the CPI. But a review of the oft-repeated suspects that suggest inflationary pressures are building make a case that the Fed is either ignoring the warning signs or has completely missed the boat when it comes to monitoring the relevant economic variables. Or maybe the Fed doesn’t put much stock in higher gold prices, an improving labor market, ascending yields in inflation-indexed Treasuries, the continued robust expansion in the gross domestic product, etc. Whatever the answer, the central bank is keeping the Fed funds at an abnormally low 1%, thereby giving inflation more time to gain a firmer hold within the economy. Such is the state of pursuing price stability: rolling the dice and hoping for the best . . .”

Get thee over there to read the rest of it . . .

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