The Fed Says Inflation Is Transitory, It Has A Vested Interest To Lie

Powell Grasps at Air in search of Inflation Expectations and the ELB

Q&A on Fed Transitory Statements

Q: If inflation picks up will the Fed say I made a mistake or will they double down?

Q: If the Fed doubles down will they admit their mistake or will they say let's overshoot to make up for past inflation?

Q: If the overshoot continues, will the Fed say dammit wrong again or will they say better 10% inflation than 10% unemployment

I believe we know the answers to those questions, paraphrased from the Eurointelligence post Should we worry about inflation? 

Eurointelligence authors wrote from the perspective of the ECB. 

They did not know if inflation will rise or by how much. Nor does anyone else given there are too many variables. 

Who predicted Covid-19 and the global response to it? 

From the point of view of the Euro, Eurointelligence listed a pair of alternatives.  

  • "Inflation may rise in the US, and that this could affect the euro area indirectly. One scenario is for a rise in the price level in non-euro global supply chains, but without a compensating rise in the euro’s real trade-weighted exchange rate."
  • "It is also possible that counter-acting deflationary forces might neutralize or overcompensate. There exists no single indicator that tells us what will happen."

Key Point 

"Those who are absolutely certain that inflation won’t rise are mostly the same people who couldn’t care less if it does."

More accurately, we have no idea what the central bankers really believe, we just know what they say to the masses.

Things We Do Know

  1. What the Fed says is not necessarily the same thing as what they believe.
  2. The Fed's track record on inflation predictions, housing predictions, bubbles, dot plots, and literally everything else has either been one big set of lies or one big set of misses. Perhaps it's a combination.

Dot Plot of Fed Interest Rate Predictions December 2016

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