Taps Coogan – July 1st, 2022

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Jerome Powell was recently asked what he wishes he had known to avoid the current inflationary crisis. Here is his answer:

The @federalreserve’s Powell blames Americans not getting sufficiently vaccinated for his inflation crisis. pic.twitter.com/GmdJjrn2Hf

— Tom Elliott (@tomselliott) June 29, 2022

 

Jerome Powell:

“…What did we get wrong? And that really was looking at these supply side issues and believing that they would be resolved relatively quickly and by that I mean, there were going to be vaccinations, everyone would be vaccinated so that the millions of people who dropped out of the labor force would come back in, so wages wouldn’t be under such pressure. That didn’t happen for a range of reasons… And then on the back of that comes the new shock in the form of the war… But it wasn’t something wrong with our models because it wasn’t in the models at all…”

The Fed apparently does not think that continuing to do roughly $1.5 trillion of quantitative easing and holding the overnight rate at zero for a year after PCE core inflation exceeded its 2% target was a mistake. Powell also doesn’t think that encouraging the Federal Government to do $6 trillion of stimulus, including unemployment benefits that paid the average recipient more than they could earn at work contributed to inflation or the drop in labor participation. 

Indeed, Mr. Powell apparently sees no culpability at all for monetary or fiscal policy in causing inflation.

Clearly, the Fed has learned nothing. 

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