Tuesday, April 5, 2011

Fed Staff Increases Its Inflation Forecast

The the Federal Open Market Committee has just released the minutes of the Committee meeting held on March 15, 2011.

The minutes indicate that the Fed staff is increasing its near-term inflation expectations. According to the minutes:

The [Fed] staff revised up its projection for consumer price inflation in the near term, largely because of the recent increases in the prices of energy and food. However, in light of the projected persistence of slack in labor and product markets and the anticipated stability in long-term inflation expectations, the increase in inflation was expected to be mostly transitory if oil and other commodity prices did not rise significantly further. As a result, the forecast for consumer price inflation over the medium run was little changed relative to that prepared for the January meeting.
Translation of this Fed Speak:

We  (The Fed) see the price inflation that is just ahead. We hope it is just "transitory" but have no basis for believing it is. In any event, we are going to only raise the price inflation forecast for the near term and hope the inflation goes away after that, which it won't if oil and other commodity prices keep climbing.
It should also be noted that this raising of Fed inflation levels is being done at the "staff" level, the clever Bernanke being sure not to spook markets into thinking Fed members are concerned about inflation and are about ready to cut the inflationary money printing party.


  1. Noooooooo! Paul Krugman said this would not happen!!!!

  2. Lowbrow translation: We're changing our underwear daily and keep extras in our desk drawers just in case.