‘Troubling Inflation Seems Far Away, Unlikely,’ Powell Says

‘Troubling Inflation Seems Far Away, Unlikely,’ Powell Says

"We understand inflation dynamics evolve constantly over time but they don't change rapidly," Jerome Powell said Wednesday, during his first post-FOMC press conference of 2021. In the unlikely event warnings about the rapid onset of inflation due to policy largesse were to prove even a semblance of accurate, that soundbite could live in infamy. Everyone apprised of the general macro narrative can list the structural deflationary forces at work across the developed world. And it's no secret tha
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2 thoughts on “‘Troubling Inflation Seems Far Away, Unlikely,’ Powell Says

  1. Raising rates AND normalizing balance sheet in tandem may have been the mistake of 2018. He had a loud Trumpet in his ear also. Value investors at that time were becoming happy about it.

  2. Inflation is a slippery concept indeed. We need inflation in the right places- travel and leisure, oil&gas, commercial real estate rents especially office buildings and malls, selected commodities, apparel (except for sweat pants), gym membership prices, restaurant prices, residential rental prices in downtown areas of cities…. there are many more. Right now the market basket for all the above items is low and their prices are in the basement. So if prices and unit volumes picked up in these downtrodden industries/assets – driving the general level of prices up, that would not be a problem. In fact that would be terrific. It would also be a short term phenomenom, unless monetary policy and fiscal policy did not adjust. You can bet that Powell would be delighted to end Q/E and normalize rates under such circumstances. And Yellen would be happy to taper fiscal stimulus as well. Would the stock market and residential sfh market be happy – well stock sectors would rotate, likely you would see a big relative adjustment but the market might be ok or better. You would probably see overall a P/E compression, and big cap tech- ughh. Residential real estate likely would stagnate for awhile- not such a bad thing either. If you told me we would see that type of pick up in inflation my reaction would be HURRAH.

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