I’m confused. Powell and his cohorts at the Fed have expressed a steadfast commitment to getting inflation back to its 2% annual target.
Some recent remarks from Jay Powell include:
“Inflation remains well above our longer-run goal of 2 percent.”
“Inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go.”
“The labor market remains very tight.”
“We remain committed to bringing inflation back down to our 2 percent goal.”
The rhetoric is strong, but is the bark worse than the bite?
We just had another blowout jobs report, and core inflation is stuck above 5%.
But the Fed passed on hiking rates in June, and the Fed is penciling in just 2 more 25 bp rate hikes this year—that’s two of four meetings. That sounds like the very gradual pace of rate hikes we saw in the 2010s when inflation was hovering just below 2%.
Is the Fed really committed to getting inflation back down?
Last year, they talked a big game, and they followed through, much to the chagrin of investors. This year, I’m not so sure. Maybe it’s simply the fear that anything more than a mild recession could be lurking.