Moreover, in its summary of economic projections, many FOMC committee members said they expect the target policy rate to reach or exceed 4.25 percent this year and exceed 4.5 percent in 2023. Last month, Consumer Price Index (CPI) inflation rose 8.2 percent year over year marking six months of year-over-year price inflation rates over 8 percent and near-forty-year highs.
This is, by far, the most hawkish announcement out of the Powell Fed yet and no doubt shows that the Fed has finally come to terms with the fact that inflation is not transitory-as the Fed long insisted-and is now impossible to deny. The Committee is strongly committed to returning inflation to its 2 percent objective. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that were issued in May. The Committee decided to raise the target range for the federal funds rate to 3 to 3-1/4 percent and anticipates that ongoing increases in the target range will be appropriate. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures…. On Wednesday, the Fed’s Federal Open Market Committee announced that it will again raise the federal funds rate by 75 basis points. Thus, while Biden may be pretending that it’s all no big deal, the Federal Reserve knows it better do something about price inflation, which even the Fed now admits shows no signs of even moderating.
This strategy may yet work to placate the most ignorant voters, but people who are paying attention know that price inflation continues to soar. When asked about price inflation in his Sunday interview with 60 Minutes, President Joe Biden claimed that inflation “was up just an inch … hardly at all.” Biden continued the dishonest tactic of focusing on month-to-month price inflation growth to obscure forty-year highs in year-over-year inflation. Thanks to Powell’s mistakes, price inflation is supercharged, and even he admits it could take years of economic stagnation or decline to…
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