Blog: Is the Fed truly "Anchoring" Inflation Expectations?
"Well anchored" inflation expectations to the 2% target are another Fed pipe dream particularly if viewed using the Fractal Market Hypothesis.
In his testimony to Congress last week, Fed Chair, Jerome Powell, sounded concerned about the stickiness of inflation but he also expressed willingness to wait some time for it come down.
He started by admitting that “the process of getting inflation back down to 2 percent has a long way to go.” But then said “Despite elevated inflation, longer-term inflation expectations appear to remain well anchored . . .” (My emphasis). But what does “well anchored” mean, and why is it important?
I'd like to talk about where this anchoring concept originated. But more importantly how Powell and the other members of the FOMC may be fooling themselves as to which inflation rate anchors consumers, particularly when applying the Fractal Market Hypothesis to inflation expectations. Can longer-term not be as important as shorter-term?