Charles Evans of Chicago Fed stated Tuesday that current levels of inflation will not last long and eventually fall below Federal Reserve targets.
Some measures of inflation are not inflation, however. running at a 30-year highEvans stated to CNBC that supply chain bottlenecks, among other problems, will recede and prices will drop.
He said that he was comfortable believing that the prices are high and that they would fall as supply shortages were addressed.Squawk Box” Interview. It could take longer than expected, it’s possible, it is certain. However, I believe that the price increases will not continue.
According to the Fed’s prefered gauge, inflation has reached 3.6% in the last few months. This is the highest level since early 1990s. There are other measures. such as the consumer price indexYou can expect inflation to heat up even faster.
Evans admitted that this trend puts pressure on the economy.
It is both a major problem and a threat to households as well as businesses. This cuts into income and wages. That’s an issue. He said that they are monitoring it. It’s not really a monetary policy problem, but it is an infrastructure supply issue right now. So I think inflation will be coming down, and I think once it’s come down, we’re still going to be in a low interest rate … world.”
However, generally speaking the Fed indicated it had met the inflation part of its mandateThis level was well above the goal of 2%. The central bank will begin to gradually withdraw from the extraordinary support that it provided in the wake of the pandemic. a tapering of monthly asset purchases
Current projections by the Federal Open Market Committee indicate that interest rate hikes are unlikely to take place until after 2022. The FedWatch tool at the CME predicts that market pricing will see the first increase in interest rates either November or December next year.
Evans indicated that while he supports tapering, Evans pointed out that soon the Fed will face the change of raising inflation to healthy levels. The Fed would likely have to maintain low rates.
“It’s simply putting difficulties on getting monetary policies to produce sustained inflation at or above 2% so that over the long-term we can average around 2%,” he stated.
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