Today’s release of the FOMC meeting minutes shows that the Fed is still way behind the curve as they continue to characterize current inflation as a primarily transitory symptom “… reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures” rather than a largely monetary phenomena.
Further, citing the war in Ukraine and the COVID-19 lockdowns in China, the Fed portrays recent world events as “… creating additional upward pressure on inflation”.
This is simply a charade as the Fed adopts a common strategy used in the political arena, attempting to shift the blame of inflation from their own 13-year long escapade of monetary recklessness to a number of recent topical anomalies.
The Fed continues the political spin indicating that they intend to “achieve maximum employment and inflation at the rate of 2 percent over the longer run” and that with the “appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong”, a nonsensical goal and conclusion given that the primary purpose of increasing the Federal Funds rate is to create unemployment (i.e. tighter business conditions leading inevitably to trimming of payrolls).
What we are seeing is a Fed that continues to willingly stay behind the curve likely in a misguided effort to balance political considerations with their actual mandated function.
If the Fed is to really combat monetary inflation (again, caused by their own highly unusual, highly risky policies) they will need to put all political considerations aside and fully embrace their current task of contracting the monetary base and, through that, the economy as a whole.
They will inevitably be causing a “hard landing” resulting in lots of unemployment, a major economic reckoning and much pain for most of the American population but this is the price that needs to be paid in order to ensure fidelity of our economic system.
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