'The surge in commodity prices...will not have a lasting impact on growth or inflation'
Bah-hahaha! That's too funny! As if the commodity prices cause the inflation! It's the other way around, you dummy! The surge in MONETARY INFLATION (which is what you Fed-dorks control) will have a lasting impact on commodity prices and growth!
Oh, these Federal Reservists really do crack me up!
Yellen vs. inflation
April 11, 2011, 12:46 p.m. EDT
Fed’s Yellen attacks inflation charges
Steady course may be best even if there are more price shocks
By Greg Robb , MarketWatch
WASHINGTON (MarketWatch) — The surge in commodity prices over the past year will not have a lasting impact on growth or inflation, a top Federal Reserve policymaker said Monday in defending the central bank from charges it’s fueling inflation.
Federal Reserve Vice Chairman Janet Yellen on Monday, in a speech entitled “Commodity Prices, the Economic Outlook, and Monetary Policy,” gave a spirited defense to the charge that it’s to blame for the spike in commodity prices. Although Yellen insisted she was presenting only her own views, she is widely seen as a member of Chairman Ben Bernanke’s inner circle and thus speaking for the majority on the Fed. She also explained the central bank’s virtually zero interest rates and plan to buy $600 billion worth of government bonds.
“I believe this accommodative policy stance is still appropriate because unemployment remains elevated, longer-run inflation expectations remain well anchored and measures of underlying inflation are somewhat low” relative to the Fed’s informal target of 2% rate or slightly below, Yellen said.
There is a very vocal minority view among some Fed regional bank presidents who believe the Fed has already kept interest rates at zero for too long.
In her speech, Yellen said the Fed isn’t to blame for the spike in commodity prices, noting prices have grown faster than the dollar has dropped — the dollar /quotes/comstock/11j!i:dxy0 (DXY 74.93, -0.13, -0.17%) has dropped about 10% since last summer compared to growth of 40% to 70% in commodities /quotes/comstock/11j!i:cry0 (CRY00 366.00, -2.70, -0.73%) — that prices have grown even when not traded on exchanges and that emerging market central bank’s aren’t primarily responsible for their nations’ fast growth.
Rather, rising global demand and disruptions to supply explain the recent run-up in food and oil prices, Yellen said.
The Fed vice chair stressed that the Fed would not let the inflation genie out of the bottle as happened in the 1970s.
“We are playing close attention to inflation and inflation expectations,” Yellen said.
On expectations, she pointed out that the near-term expectations have indeed grown, by about 1.25 percentage points, but the longer-term ones are up only a quarter point. That’s important, because in the past when short-term expectations have grown sharply, they usually reverse within a few months.
Judging by futures markets, prices will roughly stabilize near current levels or even decline in some cases, she said. Prices of gasoline will flatten out “fairly soon” and the brisk increase in food prices will last for only a few more months.
“Consequently, the direct effects of the surge in commodity prices on headline consumer inflation should diminish sharply over coming months,” Yellen said.
Subdued wage growth is yet another reason not to expect higher inflation, Yellen said.
“It would be difficult to get a sustained increase in inflation as long as growth in nominal wages remains as low as we have seen recently,” Yellen said.
The best course for the Fed may be to hold steady even if there are more shocks from commodity prices, Yellen said.
A policy tightening might mitigate the inflation risks but would make the economy even weaker.
Easing might help employment but exacerbate inflation.
“Under such circumstances, an appropriate balance in fulfilling our dual mandate might well call for the FOMC to leave the stance of monetary policy broadly unchanged,” Yellen said.
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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