For more than a decade, the Federal Reserve's quest to generate a healthy inflation rate has continued to fail, even with the relief of the central bank in 2019, which is specifically focused on the issue.
Not only did the Fed miss the 2% Goal this year, but now it also faces the fading hope that something will change at least over the next few years.
The expected inflation rate for the year is now 2.3%, according to a New York Fed Consumer Expectations Survey released this week. Although the technical number is technically ahead of the Fed's goal, it has consistently exceeded the actual level throughout its existence, often by a full percentage or more.
Reading October represents a decline of 0.2 percent to 2.3%, the lowest level ever in a study that relates to June 201
Fed officials believe that little inflation is good for the economy as it represents an increase in living standards. In designing policies during and after the financial crisis, they reached the 2% target, even though they only exceeded it once, in 2011, using the personal consumption expenditure index, reduced by food and energy prices as a benchmark . The most recent reading showed that the PCE deflator only increased at a rate of 1.7% in September.
Evans wants the Fed to be "aggressive"
Some central bank executives demand a more proactive approach.
"It's very difficult to generate inflation in the current environment," Chicago Federation President Charles Evans said during a meeting Wednesday in New York at the Foreign Relations Council. "We need to work hard to understand this. and be aggressive. "
Evans supports an approach whereby the Fed allows inflation to cross the 2% threshold for some time – standing behind the approval of the Federal Open Market Committee for a" symmetrical "target for inflation to become a little hotter or a little colder than the target for ope "It would be good if the FOMC made it clear that little in some of our discussions about our long-term strategy," he said.
Achieving the goal of 2% claimed, he added, could send the wrong Intent message to the Fed that it can start tightening politics once inflation approaches that number.
"If you limit yourself by saying that your goal is 2%, but you really act as if it were a ceiling, it reduces space monetary policy when you need to provide more monetary policy conditions during decline, "Evans said.
Evans is a member of the FOMC vote and approved all three rate cuts this year. The Committee cited low inflation as a factor in each of the moves.
Minneapolis Federal Minister of State Neil Kashkari addressed the issue during a CNBC interview Monday, saying the FOMC should announce that it will hold off on hikes until inflation reaches 2%.
The stock market likes it
of course, there are some measurements that show that the 2% target is within reach.
The 12-month average inflation measure for PCEs from Dallas to the Fed shows 2.1% inflation, while the six-month trimmed average is 2.2%. (The "trimmed" measure takes the extremes of reading.)
Similarly, the Atlanta Fed's core "sticky price" consumer price index, which includes goods that show relatively lower fluctuations, is 2.6% however, year-on-year
The Goldman Sachs security measure, however, shows inflation at about 1.85%.
Thus, policy makers continue to focus on raising inflation and this is good news for the stock market. When Fed chairman Jerome Powell said last week that there would need to be a "really significant" rise in inflation before rates start to rise again, he has played a "big role" in the market rally ever since, Bespoke Investment Group founder Paul Hickey
"It was almost the equivalent of your parents telling you on Friday that they were leaving for the weekend and would not return early on Monday. In other words, this weekend's coupon!" Hickey wrote on Wednesday. However, he noted that seven of the eight inflation indicators that Bespoke tracks show that "not only most inflation rates are below the Fed's target levels, but they are moving down rather than up."