As it turns out, some Federal Reserve officials share a growing concern that the recent spike in consumer prices will not be short-lived.
“Continuing price pressure”
An ongoing debate has erupted within the central bank regarding how long inflation will last as well as how soon officials should disengage from pandemic-era policies.
St. Louis Federal Reserve Bank President James Bullard is among those warning consumers that inflation could remain elevated well into next year.
For the most part, the federal bank has been echoing the same message as President Joe Biden, namely that the current inflationary period is transitory and that the economy is recovering smoothly. Not everyone is convinced, though.
Bullard recently told Fox Business Network’s Maria Bartiromo that bottlenecks in global supply chains could keep inflation high as the economy recovers from the COVID-19 downturn faster than many industries can keep up.
“Those things I don’t think are as easy to fix as some people think,” he said. “We’re going to see continuing price pressure well into 2022.”
“The Fed at its best”
The Fed is sticking to its near-zero interest rates with no immediate plans to scale back its bond-buying program.
Bullard is advocating for a course correction, however, asserting: “Even though we’re going to have higher inflation this year, it could even be higher than we anticipated, and it could be higher than we anticipated next year. We have to be ready for that situation.”
Robert Kaplan, who serves as president of the Fed in Dallas, Texas, is also calling for a shift from the loose-money policies of the past year, though he welcomes the current exchange of ideas by those involved in the process.
“I see the debate and disagreement as the Fed at its best,” he said. “In a situation this complex and this dynamic, if I weren’t seeing debate and disagreement, and there were unanimity, it would make me nervous.”
Recent polling shows that a majority of Americans are concerned about inflation, which is currently at its highest levels since 2008. With the economy representing a major focus of the Biden White House, it remains to be seen how long the administration can continue to insist that everything is fine.