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2022-03-17
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The Fed Got Inflation Badly Wrong -- and Now It Admits There's No Quick Fix
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Americans may have to get used to it. The rate of inflation might not return to pre-pandemic levels of less than 2% for at least another three years.</p><p>That's the blunt message the Federal Reserve delivered on Wednesday. For the first time since 2007, the central bank predicted inflation would end the year above 3% -- in fact, well above that level.</p><p>The Fed estimated the rate of U.S. inflation, using its favorite PCE price index, would average a whopping 4.3% in 2022.</p><p>That's up from the bank's 2.6% estimate four months ago and just 1.9% a year earlier. These are earthquake-like alterations for a conservative central bank that rarely make big changes in its forecasts.</p><p>It may have had no choice, economists say.</p><p>The yearly increase in the cost of living has soared to a 40-year high of 7.9% based on the better known consumer price index. The PCE index has climbed a somewhat lesser 6.1% in the most recent 12-month span.</p><p>Faced with the first serious threat of high inflation since the early 1980s, the Fed on Wednesday raised a key short-term interest rate for the first time in four years. It also forecast a higher-than-expected series of rate increases in 2023.</p><p>These moves are likely to slow U.S. growth and retard demand as part of the strategy to rebalance an off-kilter economy.</p><p>"As it turns out, the [Fed] went further than we and many others expected," said chief economist Richard Moody of Regions Financial. "Clearly the committee intended to send an aggressive signal of their resolve to rein in inflation and keep inflation expectations in check."</p><p>The central bank badly underestimated the rise in inflation last year. For months, senior Fed officials brushed off the surge in prices as 'transitory" -- a result of the reopening of the U.S. economy.</p><p>The flood of fresh spending as people got out and about, the thinking went, overwhelmed the ability of business to meet the demand. Nor were companies able to get enough materials on time, especially from foreign suppliers in China and elsewhere, because of disruptions in global trade tied to the pandemic.</p><p>All of these disruptions and shortages would soon end, the Fed believed, and result in a quick reversal in inflationary pressures.</p><p>The central bank turned out to be dead wrong.</p><p>Prices rose even faster and spread from just a smattering of goods and services to almost everything.</p><p>Not only that, but the cost of labor surged to the highest level in decades and raised the specter of a wage-price spiral, the likes of which the U.S. hasn't seen since the 1970s.</p><p>"We've had price stability for a long time and maybe come to have taken it for granted," Fed Chairman Jerome Powell admitted on Wednesday. Last month he appeared to hint in congressional testimony that the central bank waited too long to act.</p><p>Also read:Here' what the Fed's Powell has to say about inflation</p><p>When is inflation going to return to precrisis lows?</p><p>Powell insisted the Fed will do whatever it takes to squelch inflation, but he expects the process to take a few years.</p><p>The central bank predicts inflation will slow to 2.7% in 2023 and to 2.3% in 2024. Eventually the rate of price increases should subside to the Fed's 2% target.</p><p>Of course, the Fed thought the same thing last year.</p><p>What could throw the central bank off again, Powell suggested, is the Russian invasion of Ukraine. He noted the war has already caused a short-term increase in inflation.</p><p>What's more, a broader effort by the West to limit or end trade with Russia could further disrupt global supply lines, he said. Russia is a major producer of oil, wheat and other key commodities.</p><p>Still, Powell insisted the Fed will fulfill its mission of getting inflation back under control.</p><p>"We will take the necessary steps to ensure that high inflation does not become entrenched," he said over and over again on Wednesday.</p></body></html>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>The Fed Got Inflation Badly Wrong -- and Now It Admits There's No Quick Fix</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThe Fed Got Inflation Badly Wrong -- and Now It Admits There's No Quick Fix\n</h2>\n\n<h4 class=\"meta\">\n\n\n<div class=\"head\" \">\n\n\n<div class=\"h-thumb\" style=\"background-image:url(https://static.tigerbbs.com/150f88aa4d182df19190059f4a365e99);background-size:cover;\"></div>\n\n<div class=\"h-content\">\n<p class=\"h-name\">Dow Jones </p>\n<p class=\"h-time\">2022-03-17 11:26</p>\n</div>\n\n</div>\n\n\n</h4>\n\n</header>\n<article>\n<html><head></head><body><p>Fed doesn't expect high U.S. inflation to subside to pre-pandemic levels for several years</p><p>Higher prices of gas, groceries, new cars and mortgage rates got you down? Americans may have to get used to it. The rate of inflation might not return to pre-pandemic levels of less than 2% for at least another three years.</p><p>That's the blunt message the Federal Reserve delivered on Wednesday. For the first time since 2007, the central bank predicted inflation would end the year above 3% -- in fact, well above that level.</p><p>The Fed estimated the rate of U.S. inflation, using its favorite PCE price index, would average a whopping 4.3% in 2022.</p><p>That's up from the bank's 2.6% estimate four months ago and just 1.9% a year earlier. These are earthquake-like alterations for a conservative central bank that rarely make big changes in its forecasts.</p><p>It may have had no choice, economists say.</p><p>The yearly increase in the cost of living has soared to a 40-year high of 7.9% based on the better known consumer price index. The PCE index has climbed a somewhat lesser 6.1% in the most recent 12-month span.</p><p>Faced with the first serious threat of high inflation since the early 1980s, the Fed on Wednesday raised a key short-term interest rate for the first time in four years. It also forecast a higher-than-expected series of rate increases in 2023.</p><p>These moves are likely to slow U.S. growth and retard demand as part of the strategy to rebalance an off-kilter economy.</p><p>"As it turns out, the [Fed] went further than we and many others expected," said chief economist Richard Moody of Regions Financial. "Clearly the committee intended to send an aggressive signal of their resolve to rein in inflation and keep inflation expectations in check."</p><p>The central bank badly underestimated the rise in inflation last year. For months, senior Fed officials brushed off the surge in prices as 'transitory" -- a result of the reopening of the U.S. economy.</p><p>The flood of fresh spending as people got out and about, the thinking went, overwhelmed the ability of business to meet the demand. Nor were companies able to get enough materials on time, especially from foreign suppliers in China and elsewhere, because of disruptions in global trade tied to the pandemic.</p><p>All of these disruptions and shortages would soon end, the Fed believed, and result in a quick reversal in inflationary pressures.</p><p>The central bank turned out to be dead wrong.</p><p>Prices rose even faster and spread from just a smattering of goods and services to almost everything.</p><p>Not only that, but the cost of labor surged to the highest level in decades and raised the specter of a wage-price spiral, the likes of which the U.S. hasn't seen since the 1970s.</p><p>"We've had price stability for a long time and maybe come to have taken it for granted," Fed Chairman Jerome Powell admitted on Wednesday. Last month he appeared to hint in congressional testimony that the central bank waited too long to act.</p><p>Also read:Here' what the Fed's Powell has to say about inflation</p><p>When is inflation going to return to precrisis lows?</p><p>Powell insisted the Fed will do whatever it takes to squelch inflation, but he expects the process to take a few years.</p><p>The central bank predicts inflation will slow to 2.7% in 2023 and to 2.3% in 2024. Eventually the rate of price increases should subside to the Fed's 2% target.</p><p>Of course, the Fed thought the same thing last year.</p><p>What could throw the central bank off again, Powell suggested, is the Russian invasion of Ukraine. He noted the war has already caused a short-term increase in inflation.</p><p>What's more, a broader effort by the West to limit or end trade with Russia could further disrupt global supply lines, he said. Russia is a major producer of oil, wheat and other key commodities.</p><p>Still, Powell insisted the Fed will fulfill its mission of getting inflation back under control.</p><p>"We will take the necessary steps to ensure that high inflation does not become entrenched," he said over and over again on Wednesday.</p></body></html>\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".DJI":"道琼斯",".IXIC":"NASDAQ Composite",".SPX":"S&P 500 Index"},"source_url":"","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"2220796109","content_text":"Fed doesn't expect high U.S. inflation to subside to pre-pandemic levels for several yearsHigher prices of gas, groceries, new cars and mortgage rates got you down? Americans may have to get used to it. The rate of inflation might not return to pre-pandemic levels of less than 2% for at least another three years.That's the blunt message the Federal Reserve delivered on Wednesday. For the first time since 2007, the central bank predicted inflation would end the year above 3% -- in fact, well above that level.The Fed estimated the rate of U.S. inflation, using its favorite PCE price index, would average a whopping 4.3% in 2022.That's up from the bank's 2.6% estimate four months ago and just 1.9% a year earlier. These are earthquake-like alterations for a conservative central bank that rarely make big changes in its forecasts.It may have had no choice, economists say.The yearly increase in the cost of living has soared to a 40-year high of 7.9% based on the better known consumer price index. The PCE index has climbed a somewhat lesser 6.1% in the most recent 12-month span.Faced with the first serious threat of high inflation since the early 1980s, the Fed on Wednesday raised a key short-term interest rate for the first time in four years. It also forecast a higher-than-expected series of rate increases in 2023.These moves are likely to slow U.S. growth and retard demand as part of the strategy to rebalance an off-kilter economy.\"As it turns out, the [Fed] went further than we and many others expected,\" said chief economist Richard Moody of Regions Financial. \"Clearly the committee intended to send an aggressive signal of their resolve to rein in inflation and keep inflation expectations in check.\"The central bank badly underestimated the rise in inflation last year. For months, senior Fed officials brushed off the surge in prices as 'transitory\" -- a result of the reopening of the U.S. economy.The flood of fresh spending as people got out and about, the thinking went, overwhelmed the ability of business to meet the demand. Nor were companies able to get enough materials on time, especially from foreign suppliers in China and elsewhere, because of disruptions in global trade tied to the pandemic.All of these disruptions and shortages would soon end, the Fed believed, and result in a quick reversal in inflationary pressures.The central bank turned out to be dead wrong.Prices rose even faster and spread from just a smattering of goods and services to almost everything.Not only that, but the cost of labor surged to the highest level in decades and raised the specter of a wage-price spiral, the likes of which the U.S. hasn't seen since the 1970s.\"We've had price stability for a long time and maybe come to have taken it for granted,\" Fed Chairman Jerome Powell admitted on Wednesday. Last month he appeared to hint in congressional testimony that the central bank waited too long to act.Also read:Here' what the Fed's Powell has to say about inflationWhen is inflation going to return to precrisis lows?Powell insisted the Fed will do whatever it takes to squelch inflation, but he expects the process to take a few years.The central bank predicts inflation will slow to 2.7% in 2023 and to 2.3% in 2024. Eventually the rate of price increases should subside to the Fed's 2% target.Of course, the Fed thought the same thing last year.What could throw the central bank off again, Powell suggested, is the Russian invasion of Ukraine. He noted the war has already caused a short-term increase in inflation.What's more, a broader effort by the West to limit or end trade with Russia could further disrupt global supply lines, he said. Russia is a major producer of oil, wheat and other key commodities.Still, Powell insisted the Fed will fulfill its mission of getting inflation back under control.\"We will take the necessary steps to ensure that high inflation does not become entrenched,\" he said over and over again on Wednesday.","news_type":1},"isVote":1,"tweetType":1,"viewCount":191,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":2,"xxTargetLangEnum":"ZH_CN"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/634657243"}
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