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I think the fed, and the market, are basically under the belief that inflation isn't going to sustain at above 2% for long. I mean, look at it from their side.
by howeyc 5y ago
I think the fed, and the market, are basically under the belief that inflation isn't going to sustain at above 2% for long.
I mean, look at it from their side. They've been doing everything they can think of to hit 2% for a decade without success. Now, after the pandemic everyone is rushing back to work on a massive scale never seen before (plus some fiscal spending with additional unemployment benefits are still out there) and inflation is what, maybe 3% over two years if you are super generous with the numbers.
They are basically just in "wait and see" mode to know if this inflation trajectory has staying power.
- aggronn 5y agoYeah, I am sympathetic to people concerned about inflation right now, but the basic Econ 101 explanation you give is just too compelling to alarm me (and apparently the Fed and others who do this for a living). There is a clear mismatch in demand and supply. Supply is booming and its taking time for supply chains to catch up because of the structural damage that was caused by COVID. It takes time to fix that. This is short term angst, not a monetary crisis. If there's a monetary crisis occurring (asset inflation?) its been going on for almost a decade now, and its not reflected in the CPI.