Home Finance Fed Unites Left and Right in Warning It’s Behind Inflation Curve – Yahoo Finance

Fed Unites Left and Right in Warning It’s Behind Inflation Curve – Yahoo Finance

0
Fed Unites Left and Right in Warning It’s Behind Inflation Curve – Yahoo Finance

Argus's Jim Kelleher and John Eade break down stocks they see as well-positioned for 2022 on Wed, 2/9 at 2 PM ET.
(Bloomberg) — The Federal Reserve has managed to do something that’s rarely seen in the U.S. these days: Get members of the Democratic and Republican parties to agree.
Most Read from Bloomberg
Cypriot Scientist Says Deltacron Covid Variant Isn’t Error
World’s Biggest Crypto Fortune Began With a Friendly Poker Game
Cyprus Finds Covid-19 Infections That Combine Delta and Omicron
Djokovic Trains for Australia Open After Court Reinstates Visa
Alexandria Ocasio-Cortez Tests Positive for Covid-19
At this year’s annual meeting of the American Economic Association, prominent economists from both sides of the political spectrum argued that the Fed is behind the curve in the battle to contain an outburst of inflation in an economy still beset by a pandemic.
And while they generally welcomed the Fed’s pivot toward a tighter monetary stance and expect price pressures to ease this year, they sounded doubtful that inflation will decelerate as much as central bankers are forecasting. They saw it remaining well above monetary policy makers’ 2% target.
Among those chiming in at the three-day virtual conference that winds up on Sunday: Former Treasury Secretary Lawrence Summers and ex-White House chief economist Jason Furman — both Democrats — and noted monetary economist John Taylor and former Council of Economic Advisers Chairman Glenn Hubbard, who served in Republican administrations.
To be sure, not all economists — especially some on the left — are raising alarms about the inflation threat and the Fed’s delayed response to it.
Nobel Prize laureate Joseph Stiglitz, who was chief White House economist for Democratic President Bill Clinton, called for caution by the central bank. He argued that higher interest rates wouldn’t solve the supply snafus and global shortages that have helped push up inflation. In addition, labor-force participation remains well short of what it could be.
Fed Chair Jerome Powell is likely to be pressed about what he intends to do to stem inflation when he appears Tuesday before the Senate Banking Committee for a hearing on his nomination by President Joe Biden for another four-year term. Powell, a Republican, won favor from Biden and some other Democrats for his emphasis on the importance of the Fed achieving maximum employment that is broad-based and inclusive.
Faster Pace
Data due out on Wednesday will probably show that consumer prices rose 7% in December from a year earlier, according to the median forecast of economists surveyed by Bloomberg. That would top November’s 6.8% annual rise and be the largest increase since 1982.
Here are some of the points on inflation and the Fed made by a number of well-known economists in panels at the AEA conference:
Furman, a Harvard University professor, said he expects inflation to remain elevated this year, with a mean forecast of 3.2% for the core personal consumption expenditures price index. That’s above the median 2.7% forecast of Fed policy makers at their Dec. 14-15 meeting.
Meanwhile, Furman saw a 15% chance that inflation will come in higher this year than last. He also averred that the three nominees that Biden is reportedly considering for the central bank’s board “are considerably more dovish than anyone who’s been on the Fed” for a long time.
Taylor, whose monetary-policy rule has been a guidepost for central banks worldwide for years, said the Fed is “way behind” the curve. Depending on the assumptions made, he suggested the federal funds rate should be anywhere from 3% to 6%, not the near-zero percent level now targeted by the central bank.
Noting that yields on Treasury securities jumped last week, the Stanford University professor predicted seeing “more of that down the road.”
Summers, a Harvard University professor and paid contributor to Bloomberg, also foresees Treasury yields rising further.
“As the reality of the need for balancing supply and demand becomes clear, interest rates will rise substantially over the next year and a half,” he said.
Summers got into a spirited back-and-forth with Stiglitz at the conference, arguing that the Columbia University professor was placing too much emphasis on supply-chain kinks for the run-up in prices.
Gregory Mankiw, who was chief White House economist for Republican President George W. Bush, said “a lot” of the increase in inflation could be blamed on temporary dislocations in supply. “We also have a very tight labor market and you’re starting to see it in wage growth,” he said.
The Harvard professor, who is now a self-described political independent because of opposition to former President Donald Trump, said that although inflation isn’t going to stay at 7%, he’d be “surprised” if it falls back to 2% very quickly.
Former Fed Vice Chairman Alan Blinder said he still counts himself as a member of “Team Transitory” in the debate over inflation.
But Blinder, who served in the White House under Clinton and now teaches at Princeton University, has said it could take some time for “bottleneck inflation” to ease. Fed policy makers have been slow to recognize the bubbling price pressures in their forecasts, he’s added.
The soft landing that Powell and his central bank colleagues are trying to engineer for the economy “will require the Fed to be both lucky and smart,” Hubbard told the conference.
Pointing to inflationary pressures from rising rents and home prices and increasing wages, the Columbia University professor doubted whether the three quarter-percentage-point rate increases Fed policy makers have penciled in for this year will be enough.
Most Read from Bloomberg Businessweek
How Jessica Simpson Almost Lost Her Name
Intel Is About to Relinquish Its Chipmaking Crown to Samsung
Nuclear Power Gets a Fresh Look as Nations Chase Climate Goals
The Former NSA Official Vying to Steer Biden’s Cyber Policy
The Lost Girls of Covid
©2022 Bloomberg L.P.
The S&P 500's sell-off in 2021 is getting uncomfortable for most. But look down just one layer, and you'll see more pain.
(Bloomberg) — When Amazon.com Inc. announced it was raising the price of its Prime program, the company said an annual subscription would climb $20 to $139. But slightly more than half of Prime members will end up forking over almost $180 a year. Most Read from BloombergAmazon Prime Fee Rising to $180, Not $139, for Many MembersAdults Back in Charge of Stock Market as Fed Awakens Big MoneyMeta Erases $251 Billion in Value, Biggest Wipeout in HistoryStatement on Publishing ErrorGiuliani’s ‘Maske
Alphabet (NASDAQ: GOOG) has proven quarter after quarter why it is one of the best businesses on Earth. The Google search engine, YouTube, and Google Cloud parent company has a nearly $2 trillion market cap, making it the third-largest company in the U.S. During its fourth-quarter earnings report issued on Feb. 1, Alphabet announced an astounding $75 billion in revenue for the quarter and $257 billion for the entire year.
Holding a diverse mix of high-quality stocks could allow your portfolio to flourish in over a decade.
Ford earnings missed Q4 views, even as electric-vehicle sales continue to climb, Should you buy Ford stock now?
The market rally rose solidly last week, but there are still caveats. Apple and Google are among 5 stocks showing strength.
New York tax expert Robert Willens considered the implications of selling the Warner Bros. Discovery stock investors are due to get in the second quarter.
Fed tightening programs, like the one about to begin, usually clobber the economy, two economists note. Bye, bye housing boom? Hello, new leg of the bond rally?
Bank of America’s latest Global Research report designates Amazon as one of the best Internet stocks for 2022.
For years, Jamie Dimon, the CEO of JPMorgan Chase, has thought of cryptocurrencies as a sham or "worthless." But now, he says, he has stopped even calling them "currencies," preferring the term "crypto-tokens" instead.
Value stocks are still the way to play the rise in global interest rates. But what's the best way of picking them?
The world's top central banks are about to embark on "the largest quantitative tightening in history", analysts at Morgan Stanley said on Friday, estimating that $2.2 trillion worth of support would disappear over the next 12 months. A surge in global inflation is forcing the U.S. Federal Reserve, European Central Bank, Bank of Japan and Bank of England to reel in the support measures used during the coronavirus pandemic. The Fed is now expected to hike U.S. interest rates five times this year, which would be the fastest since 2005-06.
Whether you favor growth, value, or income stocks, there's a pathway to build wealth over time. Then again, there's no denying the outperformance that dividend stocks have demonstrated over the long run. In 2013, J.P. Morgan Asset Management, a division of money-center giant JPMorgan Chase, released a report that looked back at 40 years' worth of data and compared the performance of publicly traded companies that initiated and grew their payouts to companies that didn't pay a dividend.
U.S. oil prices surged above the key $90 per barrel benchmark Friday as a massive winter storm swept through Texas.
Economist explores the implications of central bank digital currencies—and why cryptocurrencies could be a “speculative mania.”
After years of pursuit, SoFi Technologies (NASDAQ: SOFI) finally has a bank charter. The all-in-one financial services company's move into banking became official recently when it won regulatory approval and then completed its acquisition of Golden Pacific Bancorp. There's a lot to like about SoFi's new look — but investors may want to consider how becoming a bank impacts the company's valuation, since the market traditionally expects very different things out of banks and tech companies, and the bank-fintech combo is still a bit new for the market.
Late last week, the solid-state battery specialist provided a promising update about its technology.
Apple is among several stocks near buy points and boasting strong relative strength lines with earnings already in the rearview mirror.
If you want to make a fortune in stocks, it's time in the market (not timing the market) that matters.
(Bloomberg) — Institutional investors are striking back in stocks, upending the brief and kooky reign of the retail day trader.Most Read from BloombergAmazon Prime Fee Rising to $180, Not $139, for Many MembersAdults Back in Charge of Stock Market as Fed Awakens Big MoneyMeta Erases $251 Billion in Value, Biggest Wipeout in HistoryStatement on Publishing ErrorGiuliani’s ‘Masked Singer’ Cameo Reportedly Prompts Walk OffSo says veteran market-structure analyst Larry Tabb, citing a panoply of evid

source

LEAVE A REPLY

Please enter your comment!
Please enter your name here