Mike (Mish) Shedlock | Apr 29, 2021 01:09AM ET
The FOMC promised more easy money labeling the recent inflation jump as transitory.h2 Fed Will Remain Accommodative/h2
The Federal Reserve Open Market Committee (FOMC) left interest rate policy unchanged.
h2 Key FOMC Points/h2The above snips are from the FOMC Press Release.
Inflation jumped as predicted, and so was the Fed comment about transitory.
h2 Reflections on Transitory/h2Inflation is Poised to Soar, 3% by June is "Almost Certain"
h2 What's Ahead For Year-Over-Year Consumer Price Inflation?/h2Expect the Word Transitory
If these spike projections are accurate, expect Powell and other members of the Fed to be howling the word transitory for weeks on end.
An even bigger jump in measured inflation is on the way.
I strongly disagree with Powell's assessment that inflation is low.
Indeed, accurately measured, and based on home prices, I believe inflation is well over 4%. I will have a better number once I crunch the latest Case-Shiller Home Price data.
For now, note that as of Mar. 31, Home Prices Rise at Fastest Pace in 15 Years
h2 Hello Fed, Inflation is Rampant and Obvious/h2 h3 Transitory or Not?/h3Curiously, I agree with the Fed that the spike is indeed transitory. I am not the only one, but there are very few of us.
On Apr. 9, I commented Expect Inflation to Accelerate? Here's 8 Reasons to Expect Decelerating Inflation
In that post I quoted Lacy Hunt at Hoisington Management as follows.
h2 Transitory Jokes/h2"Contrary to the conventional wisdom, disinflation is more likely than accelerating inflation. Since prices deflated in the second quarter of 2020, the annual inflation rate will move transitorily higher. Once these base effects are exhausted, cyclical, structural, and monetary considerations suggest that the inflation rate will moderate lower by year end and will undershoot the Fed Reserve’s target of 2%. The inflationary psychosis that has gripped the bond market will fade away in the face of such persistent disinflation."
It is easy to make jokes about "transitory" but the disinflationary forces are huge.
In addition to the 6 factors Lacy noted, I added two. Then in subsequent posts I added more reasons including tax hikes and demographics.
h2 Historical Perspective on CPI Deflations: How Damaging are They?/h2A BIS Study show routine price deflation is a benefit. Central banks have not caught on.
In their attempts to fight routine consumer price deflation, while ignoring home prices and obvious speculation, central bankers create very destructive asset bubbles that eventually collapse, setting off what they should fear – asset bubble deflations.
h2 Nearly Everyone Looking the Wrong Way/h2Factor in poor demographics and guess where we are.
With nearly everyone looking for stronger inflation and higher bond yields please consider The Fed Wants to Stimulate Bank Lending, Charts Show the Fed Failed
h2 The Fed Says "Money Doesn't Affect Inflation" Others Say "It's the Money Stupid"/h2Damn the bubbles and full speed ahead with accommodative policies as the Fed actually says "Money Doesn't Affect Inflation".
The Fed sponsored more bubbles that will burst and bursting bubbles combined with poor demographics are hardly inflationary.
h2 Yes, It's transitory! /h2The above discussion pertains to CPI measures of inflation not monetary inflation which is 100% certain to continue.
That said, the demographic forces impacting prices coupled with Biden's tax hikes (something will pass) are indeed price deflationary as would be declining asset valuations.
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.