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Five Fed Presidents Praise Inflation, Not Threatened by Rising Yields

Five Fed presidents spoke today in praise of rising inflation. Two of them promised low rates for a long time.
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US Treasury Yields 2021-01-07

In Praise of Inflation

In a Reuters interview, Barkin says rising bond yields, inflation expectations are a possible win.

  • Richmond Fed: “I am encouraged to see the rise in market indicators of inflation expectations. That is what we are trying to support.”  Barkin said he regarded a recent rise in interest rates on Treasury bonds as also part of a “reflation trade,” a sign that investors were factoring future hikes in prices into their decisions by demanding higher interest rates, rather than representing a worrisome tightening of financial conditions.
  • St. Louis Fed: “The ingredients for higher inflation are in place,” St. Louis Fed President James Bullard said in separate comments to reporters. “You have very powerful fiscal policy in place and perhaps more to come,” with Democrats now about to control the White House as well as the U.S. Senate and House of Representatives.
  • Philadelphia Fed: President Patrick Harker called the early U.S. vaccination figures, with fewer than 5 million inoculated so far, “incredibly disappointing.” “We are looking at a long period where the fed funds rate will stay at essentially zero,” Harker said. He saw "no signs that inflation is going to go out of control.”
  • Chicago Fed: President Charles Evans expressed more skepticism about the inflation to come. The boost to inflation from added fiscal spending, he told a bankers group on Thursday, is "not nearly as strong as I would like.” He said he believes inflation won’t reach 2% until 2023, and that it would not be unreasonable for the Fed to wait until mid-2024 before raising short-term rates from their current near-zero levels.
  • San Francisco Fed: President Mary Daly, in an event Thursday put on by the Manhattan Institute’s Shadow Open Market Committee, said she believes a stronger labor market will eventually give rise to higher inflation, though the upward push on prices from a tight job market is likely weaker than it was in the past, making a sudden surge unlikely. At the same time, Daly said she was reassured by a recovery in inflation expectations, which showed market participants, households and businesses are beginning to believe the Fed will deliver on its aim to overshoot 2% inflation.

Overshoot Inflation

If these market manipulators actually understood markets, they would realize they already overshot their 2% inflation target.

They don't see it because they don't know where to look and are clueless about what inflation really is.

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Inflation is rampant in home prices and asset prices in general. Speculation in equites and Bitcoin is massive.

Medical inflation is undercounted. 

Speculation Rampant

Tesla

Bitcoin

Margin Debt

The Fed does not see any of this because they have never spotted a bubble in real time and never will. 

Mish

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