“High inflation exacts a toll”
Though “there is absolutely no historical evidence that Marie-Antoinette ever said”, “Let them eat cake” (or rather, its French equivalent), the association has stuck, and the phrase is now used to indicate someone’s “obliviousness to the conditions and daily lives of ordinary people”. As prices continue to take a toll (see the latest Michigan report, where “Three-quarters of consumers in early January ranked inflation, compared with unemployment, as the more serious problem facing the nation), even well-intentioned “helpful” suggestions can be an absolute PR nightmare. Let them wear socks? Let them snuggle pets?
While there are some reasons to be hopeful that the worst is, or will soon be, over (Apartment List noted “the new year is bringing with it a bit of relief” in its admittedly seasonal National Rent Index, and the MoM rate of change in CPI declined. Some silver lining?!), both Powell and Brainard made explicit reference to the burden of inflation in their confirmation testimony earlier this week. In his testimony, Powell stuck to his usual line, repeating, “We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing, and transportation”. (Of note, referencing the differences that will likely emerge in the “post-pandemic economy”, Powell said that “monetary policy must take a broad and forward-looking view, keeping pace with an ever-evolving economy”. A break from “patient rather than preemptive”?)
Brainard also hit directly on inflation in her testimony, referencing her experience cutting her teeth in emerging markets, “In some foreign countries, I saw up close how high inflation hurts workers and families, especially the most vulnerable.” And said, “Our monetary policy is focused on getting inflation back down to 2 percent while sustaining a recovery that includes everyone. This is our most important task”.
Interestingly enough, amid record-setting wholesale inflation, even the BoJ may be changing its tune. Ahead of next week’s meeting, “sources” are signalling a possible change in the BoJ’s thinking and are indicating that the BoJ “is likely to discuss if it’s still valid to say price risks are ‘skewed to the downside’”. However, a “shift in the risk assessment of prices won’t be a signal that the BoJ is moving toward policy normalization since inflation is still far from the bank’s 2% target”.
