The Fed needs to get real about inflationFederal Reserve chairman Jerome Powell loves to use the word "transitory" to describe the threat of inflation. But with each passing day, it looks more and more like inflation pressures are mounting in a much more significant manner than the Fed would like.
The use of the word "transitory" could very well turn out to be transitory. Powell may need a new catchphrase to describe how inflation might be a bit stickier and thornier problem.
Wages are rising and so are bond yields. The housing market is still chugging along. The prices of many retail goods are going up, partly because of supply shortages but also because of real demand.
It is true that the US economy (especially the job market) still hasn't fully recovered from the depths of the coronavirus recession. But the Fed may be underestimating the recent rebound and the potential for sky-high inflation like in the late 1970s and early 1980s.
"The Fed is putting out the message that inflation is transitory and that there are still 8 million unemployed. The problem is that price expectations in various markets from wood to labor and company pricing strategies are running ahead of economic reality," said Sebastien Galy, senior macro strategist at Nordea Asset Management, in a report Wednesday.
"It will likely take two months for pricing strategies and wage expectations to gravitate back towards something more realistic," Galy added................
https://www.cnn.com/2021/05/20/investing/inflation-stocks-economy-federal-reserve/index.html
