Tuesday, February 15, 2011

WSJ: Fed’s Lacker Warns More Easing Would Lead to Inflation

A top Federal Reserve official Tuesday warned that any move by the central bank to reduce unemployment could lead to inflation, indicating he would oppose any further policy easing by the Fed to try and boost U.S. economic growth.

Richmond Federal Reserve President Jeffrey Lacker told Bloomberg in an interview the central bank is keeping a close eye on inflation, especially now that the U.S. economy is gaining speed and global food and energy prices are surging.

“I am not sure we can push unemployment that much further down or more rapidly without risking inflation picking up,” Lacker said.

Lacker, who doesn’t have a vote on the central bank’s policy-setting committee this year, has been skeptical of the Fed’s latest attempt to boost the economy and jobs by buying government bonds, warning it could spark inflation. Last week, he urged Fed officials to seriously reconsider the $600 billion bond purchases before the June deadline now that the U.S. economy looks stronger.
Read the rest here.

I don't know what this guy is smoking, but I have a bulletin for him. The inflation has arrived, and it's rising rapidly.


Commodities are rising at a breathtaking pace. Food inflation is already into double digits. But in the Federal Reserve's universe people don't need to eat, or buy gas or heating fuel for their home. Other commodities that dictate prices for all manner of consumer goods and services are skyrocketing. Cotton (think clothes) is rising at its fastest rate since the Civil War.

If we measured inflation the way we did when Jimmy Carter was president, inflation would be in the same range as it was when... Jimmy Carter was president.


Ingemar said...

You know that cartoon floating around explaining that "quantitative easing" is basically inflation? The title, reread as such, would be "Fed's Lacker warns more inflation would lead to inflation." Which is a tautology.

Visibilium said...

Well, it depends what you mean by inflation--monetary base inflation or price inflation. We don't have significant price inflation yet because monetary base inflation hasn't translated into M1 inflation.

Regarding inflation calculation, any attempt to measure a general price level is doomed to failure. The weighting of the market basket has to account for general price changes while abstracting from relative price changes. The whole project is as bad as measuring GDP, you know, like that statistic is so, so meaningful to all of us Keynesian planners.

gdelassu said...

At the risk of belaboring the obvious, inflation is not just another word for "stuff getting more expensive." One can have rising commodity prices without inflation.