Topic: Inflation will not fall to 2% target for two years, Fed's Mester says (Read 522 times)

Without a doubt you bring a very interesting point, slavery in this day and age is way more subtle than it was back in the day but it doesn't mean that it doesn't exist, after all people buy all kind of stuff with money they do not have and that they need to repay for the rest of their lives, how can we call a person that cannot ever stop working and that most of what they earn goes to someone else? I think the most appropriate word for someone like that is a slave, which is why it is important to not fall into the traps of the governments and banks and remain debt-free.

They have consistently done that by raising interest rates, but the results have been the opposite.  From 8.6% given the all-time high continues to go up to an ATH of 9.1%.  Lol, The state of macroeconomic recession is already at risk of red not only based on the decisions of the Fed, in other words they will not be able to control inflation in the current conditions, and I guess this situation will continue  continue for the next few years.

QE was only part of the inflation, though. It was too be expected that some inflation would've occurred after the economy crashed in 2008, but COVID took inflation and spiraled it out of control. We would not have seen a near 10 percent inflation rate without the irresponsible fiscal policy post COVID. Debt is obviously an issue, but the money printing the U.S. government endorsed in 2020 and beyond, in combination with shutting down of major businesses, essentially took what would have been mild inflation and multiplied it.

There is not really an end to it without at least a recession. I don't see the U.S. changing their energy policy soon, at least not until Biden gets out of the white house so the oil strategy won't work.

If the Dollar continually rises I suppose its possible because import costs will drop and effectively inflation is exported to other nations.   Ultimately the rate rises also require debt reduction and bond repurchases to reverse QE and none of that is especially possible as there is fiscal and trade deficit still remaining in close proximity.   If perhaps USA were to become one of the worlds largest oil exporters, refining and raw crude to supply nations such as China or India who have billions of people but barely any oil to supply their growing GDP then it could all balance out to currency strength and low inflation.
  I think we stall basically, Dollar will reflect lost value that only YEN is currently showing as their QE is far advanced of ours but its not too far away a similar situation of excess debt inability to repay only refinance which implies both weak currency and effective inflation above interest rates given.

I agree - this is going on forever.
And I assume they are talking about 2 years. But I believe it wont happen for around any time sooner.

This has been the case for thousands of years and I doubt that it would ever change. I mean we look back in history and say that there were bad times and we are doing "better" but the reality is that we are not doing that much better. Just to give an example, back in the day when slavery happened, the "pay" for a slave was 3 liters of beer and bread in ancient Egypt, and a place to stay.

Let's be honest, there are many nations that do not pay people that much right now when they are not even slaves, the "freedom" we have is a lie, we do not have any freedom, we are just slaves that can't be beaten or murdered anymore, that's literally the only advantage we have, but get paid a lot less.

At the end we are going to see the same we have always seen when something like this happens, politicians will protect themselves and their friends while the rest of the population will have to find a way to deal with the inflation problem which was created by the government, however if things get as bad as I think they can get then this is going to be a massive opportunity for bitcoin as there is not going to be a better scenario for bitcoin so it can get to incredible levels of adoption.

We could feel that from the government that we have in our country. They focus on the economy but they're blindfolded in the sufferings of people because of the mishandling of the economic crisis. The inflation rate here has just increased by about 6.5% this month and we have no choice but to hustle hard so we can live and survive because we can't rely on our government which only focuses on their benefit.

I think the case can be made about the actions of the governments being justified in printing that much money when the pandemic stroke, the problem is how are they going to deal with inflation levels that we are witnessing? And I have severe doubts that governments are going to be as responsible as they should be under these circumstances, because we must remember that politicians are very shortsighted and they only care about the economy not collapsing under their watch so they are not blamed for the collapse and then they can get in power yet again.

It is true that 2% will not be seen for a long time, probably not in most nations as well.
I mean there could be some Swiss numbers that could shock you, but 99% of the nations will have bigger than 2% inflation rate.

But, I am not against them printing money at that time, it was a logical reason. I mean it is never a good thing, but it was a necessary evil at that time we needed and that is what we did.

Hopefully we will reach to a point where that much printed would have been done anyway so it's okay, so if we print nothing for many years, we will get there, and it will be fine. If we keep inflation to minimum, then we will be living a comfortable life "eventually", but that needs like a fiscal responsibility for half a decade easily.

I guess that it will probably stay the biggest inflation in USA (and most nations broke their inflation record as well, at least for many decades). Why will we not have this much again? Because, this was due to pandemic. What did governments do to overcome this?

They simply printed money and distributed it to everyone. That should tell you enough about the problem, people failed to work due to pandemic and social distancing and staying at home etc etc, and that resulted with the fact that if you want government to help you out, you will save that day, but screw the next day. That's what we are living right now, and doesn't look like it will be fixed in a minute.

Looks like for this one that the fed is going to need more than 2 years for this mess to be fixed as there are other global factors that the fed can't do much about.  They must be careful not to overcorrect or correct too soon as to not trigger a recession (unofficially here) or a depression; a lot hangs in the balance.

This is the biggest inflation in America in a long time. Inflation is now over 8%. This is the highest rate the country has reached since the very 1980s, so it's not at all easy for the US government to bring that down to 2% as they hope. There are a lot of factors, especially high fuel Unprecedented because of the Russian-Ukrainian war, some economic experts believe that this crisis is similar to the crisis that occurred after World War II and that the United States was able to overcome, but others believe that this crisis will continue and no one can predict how long it will last.
The Republicans accuse the Democrats of being the ones who led the country to this inflation. This means that there are political differences that also fuel this inflation. Therefore, in my opinion, inflation will continue for a long time, especially in the conditions of Corona and the Russian-Ukrainian war.

But that is the problem, politicians never want to take responsibility for what they do, even if the healthiest thing that could happen to the economy for its long time prospects is to have a recession and for many unneeded companies to disappear, this means unemployment for a lot of people which will cost voters, local elections and maybe even the presidential elections to the party in power, and they are never going to accept something like this unless they literally had no other choice.

I honestly believe that the best thing we could do right now is pressure the US government and FED to increase the rates as much as possible. If they do that, then the whole world would have to follow and do the same otherwise it is going to hurt a lot. This is why there is a good chance that we could end up with a big problem if things keep going like this, inflation can't be sustained forever.

We need it to go down a bit, maybe not 2% of course , not right away at least, but we need it to go down for sure. At the end of the day, it is all up to them, it's out of our control and we should go back to crypto, to see what we can do and that would be much better.

Inflation is when the liquidity is high but supply is low. As we see the supply of essential goods has suffered greatly due to war and climate change. The option with Fed is to increase rates to make poor man suffer and bring recession. But with decentralized economic system like bitcoin. I think if not now but in future we will have a mean to fight off the monopoly of fed to regulate our money by simple rate increases.

1.Yes, the Federal Reserve has enough power to stop the inflation and put it under control. A big enough interest rate hike can stop the inflation. The problem is that the politicians don't want to cut the government costs and reduce the gigantic US federal budget deficit.
This will cause the Federal reserve to restrain from big interest rate hikes, because it will become difficult for the US government to borrow money and pay debts with higher interest rates.
2.The US economy has been running on steroids for several years(money printing, stimulus packs, Trump's tax cuts). A recession might be healthy for the economy. Lots of bad businesses will go bankrupt, lots of "bullshit job" positions will get shut down. Unfortunately, the "too big to fail" banks and corporations will receive government support again.

I believe the next two years will be very difficult. Neither the prices are coming down - nor the inflation will be in control.
If we believe things will get better sooner. Than we are only fooling ourselves. The time is very tough - I am not sure how the poor people will be managing their finances.

It would be nice to see inflation fall under that target within two years, but unfortunately we seem to be on a runaway train and nobody knows how to turn the brakes on. The fact that inflation is on this course is partly due to the reckless and extended cheap money that the Fed pumped into the market for over a decade, which was further topped up during Covid. It'll be interesting to see whether it is a slow and steady wind down, or a disorganized economic crash, but you should be careful putting any faith into the predictive abilities of the fed, because they are often reactive instead of proactive - they go with whatever is the most convenient policy of the current day instead of the best for long term health.

Inflation is not something that changes so suddenly so if there is 7-8% in one year chances are it will decline quite slowly and then comes to a subtle number and stabilizes on to something . Currently we are in situation where the inflation would rise as the money supply is rising continuously and there is no signs of some great economic growth along with that. But Fed can do that only by ensuring there is enough GDP growth so that there are enough people in the economy to absorb inflation.

It was the Fed who just admitted that THEY currently now understand that they have little understanding about the current inflation, and how to fix it. Because, they did the necessary steps, but inflation keeps going higher and higher.

BUT this is what EVERYONE of plebs should understand. The Federal Reserve doesn't care about our investments in stocks, in commodities, or in Bitcoin. They're main concern is to fight inflation, and maintain the U.S. Dollar's value AND its status as a Global Reserve Currency. Because if hyperinflation happens, it will END the U.S. Dollar's status as a Global Reserve Currency, and END the United States' global dominance over the world. I believe the Fed will crash the economy through more tightening and rate hikes if they need to, to save the Dollar.

We do have a fucking clue to be fair . We have a high inflation because we have a lot of money. Just in the past 3 years, USA printed nearly half of all the money they ever printed. Yes that is right, I do not know when was the first time they printed dollars, but it must be over 200 years now, so for the first 197 years, they printed as much as they printed for the past 3 years. If that doesn't tell you a good reason why inflation is high, then nothing would.

Same happened in many countries, and maybe the numbers wouldn't be similar but that is all about what's going on right now, the amount of money printed all around the world is too high and that's causing all this trouble.

It's actually not. In the context of how he said it, I believe he was trying to give everyone the thought that the might not have no other choice but to let the economy go have a "hard landing", because in his words it was something like, "their options in how to fix inflation without causing a recession is narrowing".


Ser, it's either raise the interest rate, or hyperinflation. Save the Dollar, or the economy? History has taught us that since 2008, the Fed always tightened after QE, and went to QE again.

America's economy has a strong influence globally, if inflation occurs in the USA then the direct impact is that many countries that export to the USA will get a new policy, I work in a food raw material company with customers from the USA, and the impact is felt because they reduce imports more than 50% since the end of 2021.

So, you read 6854754 books of economy, know for experiences in 812231237 times, that INFLATION ITS A MONETARY THING. And know if you print 89123182738172387123 ton of dolars obviusly in a short time you have inflation but, after doing all the things bad and making the things you dont have to do say " Ohhhhh i dont know why its the inflation coming, its multicausal" or "its because the war in Ukrayne" pure shit.

And being for a country with 60% annual inflation all the years i can say tou you the goverment say pure lies about it, because they print to cover their bad administration, the print to keep the wheel rolling, they print to re-buy his own state bonds.

I know in some times of emergency you need to print without respalding (some extremes circunstances) but after that not say "ohhh i dont know where its this coming from".

Remember when the fed said inflation was transitory? Also, isn't it absurd that the U.S. government admits to its currency holders that their purchasing power will not go down to the luxury of 2% year over year reduction until 2024, rather they must suffer with triple that amount and more until then. After all the suffering, then only are you rewarded with a 2% yearly reduction in spending power.

Anyone that understood the ramifications of endless money printing recognized there wasn't a way to lower inflation without effecting the interest rates severely and slowing the economy into a recession, the fed are years behind.

If he had said this statement, it is a good step forward, as the lack of knowledge of the nature of inflation suggests that they will not continue with a single monetary policy, but that policies may change according to the variables, and therefore we may not witness more interest rate hikes in the coming months.

Continuing to raise interest rates would be disastrous.

I believe it's true. Inflation might not fall to 2% in two years. Probably longer. Jerome Powell released a statement yesterday during an FOMC meeting and said that they ave started to understand that they now have no understanding about the current inflation.

What? It's a joke by me? NO, he actually said something like that!

Yeah, 2% right now doesn't look like a lot, great also if someone is optimistic. But then again, we now have the looming of war and its a burden on our economy. Food and energy shortage are also in effect. Seem like a tough time is ahead for both the US and the world economy. Guess the statement from FED is too good to be true.

Of course it has the power. As odolvlobo says:



I doubt this. The most recent precedent is the Reagan era. It came from the term of Jimmy Carter who with his policies left an economic situation very similar to now. With Reagan the interest rates went up a lot and a recession was provoked, but it was necessary, as if you had to pull someone's tooth so that it would not get infected. It will hurt, but not pulling it out will be worse:

Reaganomics

"The inflation rate, 13.5% in 1980, fell to 4.1% in 1988, in part because the Federal Reserve increased interest rates (prime rate peaking at 20.5% in August 1981). The latter contributed to a recession from July 1981 to November 1982 during which unemployment rose to 9.7% and GDP fell by 1.9%."

What followed was an era of economic growth, low energy prices and moderate inflation.

The Federal Reserve has the power to control inflation by 2% over the next two years(like by increasing the interest rate,money supply, other monetary tools). However, it is not clear if the Federal Reserve will be able to achieve this goal. Inflation has been increasing recently and there is a risk that it will continue to do so. If it continues to increase then it makes the Federal reserve impotent    Which will make it difficult for the Federal Reserve to reduce inflation to 2%.

Impossible.
The Federal Reserve is tasked with maintaining price stability and maximum employment. In order to achieve these goals, the Fed uses monetary policy tools such as interest rates to manage the economy. Raising interest rates is a way to slow down the economy and reduce inflation. However, it also risks causing a recession. Fed policymakers are aware of this risk and believe that the current rate increase is warranted given the current economic conditions. The recession is here to stay for a long time 

You have to question the intelligence and long term planning of central banks if history is anything to go by. At best when everything is going steady and things look all rosey then they have no issues predicting more of the same. However they always seem to be stung and very inaccurately forecast big problems before they happen, often simply reacting to events that you'd imagine they are paid to manage in advance. Apparently nobody could have predicted the runaway inflation that we're seeing now and the policymakers are struggling to catch up to current events, raising interest rates by large amounts in an effort to tame inflation but it also looks like they're acting too slowly again.

That is correct, rapid deflation isn't healthy for the economy either. I highly doubt that it'll happen in 2 years as OP mentioned, a couple could possibly mean more than 3-4, which is a more realistic approach. As long as the war continues, we're going to have a huge burden on the economy, which is also susceptible to worsen in the future if action isn't taken with oil, wheat and electricity.

It is normal to not fall to those levels that quickly. In fact, it could even hurt you if it hurts that quickly, meaning if the prices stay that way and do not go up, the growth would be stopped and that would hurt the economy as well, nobody would make a profit.

Definitely 2% is great, but it is great when it is there forever, if you could lock it for the next 100 years that would be insanely great. But if you go to 7%+ and your gas prices increase to a whole new record levels, then making the inflation 2% again could hurt more than it helps. This is why it needs to be dropping small by small, lower and lower, which will make sure that eventually it will be there but since it has been a while, everyone will be ready.

I, to be honest, thought that 5% inflation rate was considered pretty good, so is 2% even a desirable target? Maybe it won't get there, but if it gets below 5%, isn't it alright? I mean, not in general, because money devaluating is basically a hidden tax, but in terms of how fiat works and how it's argued that some inflation is good to motivate people to spend money instead of hodling. And also, I think the focus should not be on inflation and decreasing rate of economic growth, but things like redistribution of goods, better social policies etc.

They can do whatever they want, for the common man they are the gods on the throne who decide in which direction their nation will go, but unfortunately also the direction in which most of the world will go. From all that can be read, such measures inevitably lead to a recession, and it seems that this is their goal - and not only for them but also for other governments in the world that are making almost identical moves.

When you say that the recession could last for several years, I think its consequences will be felt at least until the end of this decade - because the war on the Eastern European border and the statements coming from the aggressors clearly indicate that they want much more than they have now. The EU without cheap oil and gas and with green ideologies will not do well in all this, which will probably bring to power various radical and anti-EU politicians.

The example of the recently concluded parliamentary elections in France speaks volumes about how things are changing - the Macron party lost an absolute majority, and Marine le Pen won as many as ten times more MPs than in the last elections.

---

Covid will not be a problem for at least another 2-3 months in the northern hemisphere during the summer, and restrictions and new vaccinations will probably start again in the fall. As for Russia and its intentions in Ukraine, not everything is as it seems - because the Russians have almost everything they really wanted - everything else was a smokescreen and a tactical stretching of Ukrainian forces.

Of course, all these measures taken up to counter the rising inflation won't be effective overnight. It will take time. The effects will slowly trickle down to the bottom. Not to mention that even if there are efforts for recovery, the problems are not yet gone. They're still here. COVID is still around, with new variants still forming. The Russian invasion isn't over yet even if the Russian army is already pushed back. And the global effects of these two are still felt by the world.

But I don't think there will be a recession even if the Fed fails to pull down inflation to 2% within the next couple of years. Perhaps there'll be very low growth as compared to the target. At most, there'll probably be a slight decrease in GDP, but will just be temporary to be considered recession.

Two weeks of lockdowns to flatten the curve (COVID).

Two years of inflation to flatten the debt cycle.

I think we've all heard this before.

They say history repeats itself due to people refusing to learn from past history.

Is it more astonishing that people believe they're better off not knowing history. Or is it more astonishing that governments and politicians have used many of the same tactics and strategies for thousands of years, without the majority of people learning to recognize and adapt to them?

Voltaire is famous for saying fiat currency always returns to its intrinsic value of zero. There was a considerable historical precedent behind him making these claims. So it appears history may repeat itself again. And people will be taken by surprise if it happens. Despite it occurring frequently throughout history.

Roughly 1,500 years ago the roman empire suffered from a hyperinflating denarius. And it seems today people may experience similar conditions. Without connecting the dots between past and present.

Why?
It is exactly that thing that goes against the usual current that needs to be analyzed, especially since it's the one case where inflation is not happening, just when it comes to a disease, you're looking at why this guy survived or did not get infected for clues.

And culture, school of thought, things that can apply to only a country, the mentality of a population, those things are just on paper, one week of fasting after one month of two loaves of bread a day menu and you will see how easily people can suddenly forget everything, from religion to the name of their ancestors. It's quite funny actually, you dismiss the case of Japan because well, not everyone can change their way like that,  while at the same time we're here on Bitcointalk where we talk about changing the whole way the economy works, in the whole world, isn't that contradictory much?


I see it as a valid reason, I mention it, simple as that!
People can stop inflation themselves, it only needs a gentle push and the FED won't be able to do a thing about it, if everyone would simply cut their expenses you're going to see prices and inflation going down, deflation can be triggered easily if the absolute majority wants it and are prepared for it.

I think that inflation in Japan and the nature of the market there needs a separate school of thought because it is not subject to most of the current investment laws, so we cannot consider it an example that we can rely on.

The culture of thrift in Japan (Secondhand Tokyo https://savvytokyo.com/thrift-like-a-local-the-tokyo-west-edition/) is not just a habit that occurs when the economic situation becomes deteriorating, but it has become a culture of the people.

Therefore, there is no reason to mention the issue that some inflation factors are outside the Fed's control.

That was kind of a hedge-y statement, and I think I agree that she might not have meant exactly two years.  Considering that inflation has only recently begun to spike, I was thinking that things might get a hell of a lot worse before they get better.  What's inflation at in the US right now, 8% or something like that?  That didn't come about because of something that happened just recently; it is what it is because of the rampant money printing, all the stimulus checks, and who knows what else--but it's been a long time coming.

As far as whether the Fed has the power to reverse inflation and get it to 2%, my answer would be yes.  That's part of the reason they exist, and it's why they're so careful about adjusting interest rates--they have tremendous power over the economy. 

The real question on my mind is how they're going to decrease inflation without crashing the stock market (and perhaps crypto as well).  I'm not sure it can be done.

The Fed certainly has the ability to control inflation. That was proven by Fed Chair Paul Volcker in the 1980's.

I have no idea if their actions will cause a recession, but I think that if the Fed does not cause a recession then the alternative will be many years of economic stagnation.

Yes. Without the FED's BRRR, this inflation wouldn't have happened.
The real question is: do you think the FED is going to use said power to control inflation? I'm not so sure about that.

What's wrong with a recession? Central banks act as if recessions aren't a natural part of the economic cycle. It happens. Let it crash, and restart, instead of more and more desperately trying to keep the economy booming.

Why does it have to be the FED alone?
Inflation doesn't happen just because you print money (see Japan) and shortages that drive up products can't go forever because of the basic laws of a free economy. Things will both become too expensive and demand will start going down at the same time, rising prices till that moment will make sure a lot of production is added to supply things that bring in a ton of revenue. The 2% might not be achievable if some other shit happens somewhere else in the world but the ones that think we're risking hyperinflation are just the same doomsday preachers that have been wrong so many times in the past.

Remember the last oil crisis when it triggers the shale boom?
Food prices going up and increased revenue per ha for farming will simply make farmers think of expansion, hiking up agricultural lease price to a level where previously uncultivated land become economically feasible for both the owner to lease and the farmer to work it out.

If people don't want to buy stuff and drop purchases both merchants and manufacturers have no other choice than to drop prices or go out of business, it has been always like that and this will be absolutely no difference in it.


Wanna bet on the first and last past? 

- If Fed had that much control over inflation then they would be able to actually get the control of the situation right now and the situation won't even be that bad in the first place and therefore i do think that this would not happen as well.

-What they are trying to do is to make people stop giving jobs, which indirectly affects the whole economy which is honestly a bad thing to do for people who are struggling with everything as well.

-They would have to provide support for the recovery hands down which means that they would have to make this target for 3-4 years as well.

-The whole market is down at the moment and they are not able to do anything as well, Europe will recover faster for sure considering the war does not go on for that long.

Post-pandemic recovery, economic reform continues to experience many bad things. Because to provide opportunities for the Fed to restore the economy. But other than that, they don't realize that the bloated printing of money is causing a recession to eat away at every economy, especially the United States, Europe and Asia.

On the other hand, interest rates are finally a solution so that tax dissidents are increasingly burdened. Imagine the lower middle class that was hit more badly, while the upper middle class seemed to be hit by liquidity.

Intensive recovery with a target of 2 years ahead will only lead to a prolonged crisis. How can it last for 2 years without any certainty that the economy will improve?

Along with inflation, now both the Fed, the central bank and all the elite will feel dictated to secure their money to a stable subject.

With such a heavy money-printing spree due to COVID and then the energy war and Ukraine war, I think that this is a situation/state of affairs that doesn't even have to be detailed much.
Yes, big inflation will stay for some more years, and no matter what happens next, in the near future it can go only for the worse (even higher inflation, recession, ...)
After all, inflation in US is not even as big as in (many) other countries. And yes, I know, the official numbers are not the real values; it's the same everywhere.

Unfortunately since it's bear market for Bitcoin too, people will turn their back to this incredible opportunity and lose.

Considering the current state of the recession, it can have a bad impact on all sectors in all regions of any country. If the improvement process is expected to slow down, the FED will find it increasingly narrow to evaluate. Plus the recession that we saw clearly spiked could be even more directional when the pandemic first hit. Many are eroded to think about paying interest rates because the increase is quite large. Moreover, the expanding war market presents a major obstacle to the US doing business in the region. Nearly 40 countries are now flocking to avoid the recession by guaranteeing limiting exports of goods for the sake of supply in their respective countries because of long-term preparations.

"a couple of years" might mean more than 2 too.

We may just end up seeing something similar to the start of the pandemic too (if it's well managed). In 2007 and 2008 the UK saw a 5% inflation before the prices settled again, that'll probably be what happens this time - most inflation is driven by oil prices and those may be optional expenses in some cases too...

Source: https://www.investing.com/news/economy/feds-mester-says-it-will-take-2-years-until-inflation-falls-to-2-target-2838671

• Do you think that the Federal Reserve has enough power to control inflation within 2% over the next two years?
• Do you think Fed can do that without causing a recession that may last for several years?

Inflation that is happening now is linked to several factors that the United States may not be able to move well, so Fed should be careful about monetary policy, analyzes indicate an interest rate of at least 3.4% in the next six months, which means more rate hikes of about 50 basis points each meeting in the coming months.