Fed’s Bostic Finally Admits It: Inflation Is Not Transitory, And It’s Getting Worse

October 12, 2021   |  
Fed's Bostic Finally Admits It: Inflation Is Not Transitory, And It's Getting Worse

Atlanta Fed president Raphael Bostic finally broke away from the fake narrative bandwagon created by his Fed peers, the complicit media and Wall Street sycophants, when during a virtual speech at the Peterson Institute of International Economics, he said that price surges caused by supply-chain disruptions or the reopening of the services sector are likely to last, i.e., they are not transitory, and seem to be broadening to more parts of the economy, i.e., getting worse.

Or precisely what we have been saying since May.

"It is becoming increasingly clear that the feature of this episode that has animated price pressures — mainly the intense and widespread supply chain disruptions — will not be brief," Bostic said says in prepared remarks during the virtual presentation, which have assured he will not be on any lists for internal promotion once Powell decides to call it quits when "transitory" hyperifnlation can no longer be contained.

"Data from multiple sources point to these lasting longer than most initially thought. By this definition, then, the forces are not transitory."

Powell has stubbornly maintained the rise in inflation is "transitory" with projections from the Fed's rate-setting meeting predicted an annual inflation rate of 4.2% by year's end, an increase from 3.4% in June before cooling to 2.2% next year, in line with their goal range.

But Bostic, a voting member of the Fed's rate-setting committee next year, disagreed with that sentiment: He said that inflation risks are not starting to diminish and noted that evidence is mounting that price pressures have "broadened beyond the handful of items most directly connected to supply chain issues or the reopening of the services sector."

“Longer-run inflation expectations measures have climbed, with many reaching levels we haven’t seen in about a decade. These upside risks to the inflation outlook bear watching closely” he said, perhaps eyeing the latest staggering consumer inflation expectations released by the NY Fed earlier today.

"The real danger is that the longer the supply bottlenecks and attendant price pressures last, the more likely they will shape the expectations of consumers and businesspeople, shifting their views on pricing and wages in particular," he said. 

Still, Bostic said he believes that many of the upward pricing trends caused by the pandemic will "unwind by themselves," though he cautioned that supply chain disruptions could last longer than expected.

“If highly accommodative monetary policy is meant to correct past inflation shortfalls, then we have accomplished that mission. Up to now, indicators do not suggest that long-run inflation expectations are dangerously untethered. But the episodic pressures could grind on long enough to unanchor expectations.

In a separate interview with The Financial Times, Bostic said that Fed's taper timeline should not shift, despite the worse-than-expected September jobs report: "I’d be comfortable starting in November," he said in the interview. "I think that the progress has been made, and the sooner we get moving on that the better."

And while we wait for the Fed to engage in immediate damage control and define the word "transitory" to include "everything up to and beyond one lifetime", we also look forward to Bostic's stock trading records being leaked in the coming days as his shocking honesty could finally crush what little credibility the Fed has left.

Tyler Durden Tue, 10/12/2021 - 14:47