June 19, 2021, 8:32

    Fed’s inflation-messaging dilemma worsens

    Fed’s inflation-messaging dilemma worsens

    Accelerating U.S. inflation is a communication, rather than an economic, problem for Federal Reserve Chair Jerome Powell . Consumer prices rose 5% in May from a year earlier, the highest annual rate since 2008, data showed on Thursday. Even the core rate, which strips out food and energy prices, was up 3.8%, a three-decade high.

    True, many businesses were shut down and air travel had nearly ceased a year ago. But there are also other oddities. Used car and truck prices jumped by 7.3%, bolstered by fleet purchases by rental-car firms due to shortages of new vehicles. That makes life much harder for the Fed than for the European Central Bank, which sees euro zone inflation at 1.9% this year and 1.5% in 2022 read more . While it makes sense for Powell to take a wait-and-see approach, and U.S. bond markets are so far keeping the faith with him, the longer the distortions last, the more challenging his job will become. (By Gina Chon)

    Sourse: reuters.com

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