The Fed Made a Serious Mistake

[claireokc]

Commentary The latest released U.S. inflation was expected to slow down. The rationale behind such a bet by the economists might be the high base of a year ago: March 2021 was at 2.6 percent, and April 2021 was 4.2 percent. If only in this sense, a slower number for last month may not mean price pressure truly eased but simply an arithmetic illusion. Many having wishful thinking would regard inflation as transitory and peak out soon. One reason for having that view was too much reliance on the experience of recent decades where inflation was always contained automatically. Another main argument that inflation would peak out early or automatically (in a sense without much monetary tightening) is based on the supply-side argument. That says that lockdowns under COVID-19 which cause supply reduction (i.e., logistic blockage) are the true cause. This has been indeed the case two to three quarters ago. However, lockdowns are now already in the past, except in China. Indicators like the Baltic Dry Index which measures the cost of transporting key materials by sea have come down by over half from the peak, suggesting the supply-side argument cannot explain recent inflation. ...

Source: https://www.theepochtimes.com/the-fed-m ... 56908.html