Inflation will not fall to 2% target for two years, Fed's Mester says

[Husires]

WASHINGTON (Reuters) -Cleveland Federal Reserve Bank President Loretta Mester said it will take two years for inflation to fall to the central bank's 2% target, adding that it will be "moving down" gradually from the current level.

A surge in inflation, which is at its highest level in 40 years, has made hawks of nearly all Fed policymakers, only one of whom dissented earlier this week against what was the central bank's biggest rate increase in more than a quarter of a century.

"It isn't going to be immediate that we see 2% inflation. It will take a couple of years, but it will be moving down," Mester said in an interview with CBS News on Sunday.

Mester said she was not predicting a recession despite slowing growth.

"We do have growth slowing to a little bit below trend growth and we do have the unemployment rate moving up a little bit. And that is OK, we want to see some slowing in demand to get it in line with supply," Mester added, referring to forecasts submitted in the past week by participants of the Federal Open Market Committee's meeting.

Policymakers currently expect to raise the Fed's benchmark overnight interest rate, now in a range of 1.50%-1.75%, to at least 3.4% in the next six months. A year ago, the majority thought the rate would need to stay near zero until 2023.

On Friday, the Fed called its fight against inflation "unconditional."

Source: https://www.investing.com/news/economy/feds-mester-says-it-will-take-2-years-until-inflation-falls-to-2-target-2838671

• Do you think that the Federal Reserve has enough power to control inflation within 2% over the next two years?
• Do you think Fed can do that without causing a recession that may last for several years?

Inflation that is happening now is linked to several factors that the United States may not be able to move well, so Fed should be careful about monetary policy, analyzes indicate an interest rate of at least 3.4% in the next six months, which means more rate hikes of about 50 basis points each meeting in the coming months.

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[jackg]

"a couple of years" might mean more than 2 too.

We may just end up seeing something similar to the start of the pandemic too (if it's well managed). In 2007 and 2008 the UK saw a 5% inflation before the prices settled again, that'll probably be what happens this time - most inflation is driven by oil prices and those may be optional expenses in some cases too...

[hyudien]

Considering the current state of the recession, it can have a bad impact on all sectors in all regions of any country. If the improvement process is expected to slow down, the FED will find it increasingly narrow to evaluate. Plus the recession that we saw clearly spiked could be even more directional when the pandemic first hit. Many are eroded to think about paying interest rates because the increase is quite large. Moreover, the expanding war market presents a major obstacle to the US doing business in the region. Nearly 40 countries are now flocking to avoid the recession by guaranteeing limiting exports of goods for the sake of supply in their respective countries because of long-term preparations.

[NeuroticFish]

With such a heavy money-printing spree due to COVID and then the energy war and Ukraine war, I think that this is a situation/state of affairs that doesn't even have to be detailed much.
Yes, big inflation will stay for some more years, and no matter what happens next, in the near future it can go only for the worse (even higher inflation, recession, ...)
After all, inflation in US is not even as big as in (many) other countries. And yes, I know, the official numbers are not the real values; it's the same everywhere.

Unfortunately since it's bear market for Bitcoin too, people will turn their back to this incredible opportunity and lose.

[naira]

Post-pandemic recovery, economic reform continues to experience many bad things. Because to provide opportunities for the Fed to restore the economy. But other than that, they don't realize that the bloated printing of money is causing a recession to eat away at every economy, especially the United States, Europe and Asia.

On the other hand, interest rates are finally a solution so that tax dissidents are increasingly burdened. Imagine the lower middle class that was hit more badly, while the upper middle class seemed to be hit by liquidity.

Intensive recovery with a target of 2 years ahead will only lead to a prolonged crisis. How can it last for 2 years without any certainty that the economy will improve?

Along with inflation, now both the Fed, the central bank and all the elite will feel dictated to secure their money to a stable subject.

[fiulpro]

- If Fed had that much control over inflation then they would be able to actually get the control of the situation right now and the situation won't even be that bad in the first place and therefore i do think that this would not happen as well.

-What they are trying to do is to make people stop giving jobs, which indirectly affects the whole economy which is honestly a bad thing to do for people who are struggling with everything as well.

-They would have to provide support for the recovery hands down which means that they would have to make this target for 3-4 years as well.

-The whole market is down at the moment and they are not able to do anything as well, Europe will recover faster for sure considering the war does not go on for that long.

[stompix]

• Do you think that the Federal Reserve has enough power to control inflation within 2% over the next two years?
• Do you think Fed can do that without causing a recession that may last for several years?

Why does it have to be the FED alone?
Inflation doesn't happen just because you print money (see Japan) and shortages that drive up products can't go forever because of the basic laws of a free economy. Things will both become too expensive and demand will start going down at the same time, rising prices till that moment will make sure a lot of production is added to supply things that bring in a ton of revenue. The 2% might not be achievable if some other shit happens somewhere else in the world but the ones that think we're risking hyperinflation are just the same doomsday preachers that have been wrong so many times in the past.

Remember the last oil crisis when it triggers the shale boom?
Food prices going up and increased revenue per ha for farming will simply make farmers think of expansion, hiking up agricultural lease price to a level where previously uncultivated land become economically feasible for both the owner to lease and the farmer to work it out.

If people don't want to buy stuff and drop purchases both merchants and manufacturers have no other choice than to drop prices or go out of business, it has been always like that and this will be absolutely no difference in it.

Yes, big inflation will stay for some more years, and no matter what happens next, in the near future it can go only for the worse (even higher inflation, recession, ...)

Wanna bet on the first and last past? 

[LoyceMobile]

Do you think that the Federal Reserve has enough power to control inflation within 2% over the next two years?

Yes. Without the FED's BRRR, this inflation wouldn't have happened.
The real question is: do you think the FED is going to use said power to control inflation? I'm not so sure about that.

Do you think Fed can do that without causing a recession that may last for several years?

What's wrong with a recession? Central banks act as if recessions aren't a natural part of the economic cycle. It happens. Let it crash, and restart, instead of more and more desperately trying to keep the economy booming.

[odolvlobo]

• Do you think that the Federal Reserve has enough power to control inflation within 2% over the next two years?
• Do you think Fed can do that without causing a recession that may last for several years?

The Fed certainly has the ability to control inflation. That was proven by Fed Chair Paul Volcker in the 1980's.

I have no idea if their actions will cause a recession, but I think that if the Fed does not cause a recession then the alternative will be many years of economic stagnation.

[The Sceptical Chymist]

"a couple of years" might mean more than 2 too.

That was kind of a hedge-y statement, and I think I agree that she might not have meant exactly two years.  Considering that inflation has only recently begun to spike, I was thinking that things might get a hell of a lot worse before they get better.  What's inflation at in the US right now, 8% or something like that?  That didn't come about because of something that happened just recently; it is what it is because of the rampant money printing, all the stimulus checks, and who knows what else--but it's been a long time coming.

As far as whether the Fed has the power to reverse inflation and get it to 2%, my answer would be yes.  That's part of the reason they exist, and it's why they're so careful about adjusting interest rates--they have tremendous power over the economy. 

The real question on my mind is how they're going to decrease inflation without crashing the stock market (and perhaps crypto as well).  I'm not sure it can be done.

[Husires]

Inflation doesn't happen just because you print money (see Japan)

I think that inflation in Japan and the nature of the market there needs a separate school of thought because it is not subject to most of the current investment laws, so we cannot consider it an example that we can rely on.

The culture of thrift in Japan (Secondhand Tokyo https://savvytokyo.com/thrift-like-a-local-the-tokyo-west-edition/) is not just a habit that occurs when the economic situation becomes deteriorating, but it has become a culture of the people.

Therefore, there is no reason to mention the issue that some inflation factors are outside the Fed's control.

[stompix]

I think that inflation in Japan and the nature of the market there needs a separate school of thought because it is not subject to most of the current investment laws, so we cannot consider it an example that we can rely on.

Why?
It is exactly that thing that goes against the usual current that needs to be analyzed, especially since it's the one case where inflation is not happening, just when it comes to a disease, you're looking at why this guy survived or did not get infected for clues.

And culture, school of thought, things that can apply to only a country, the mentality of a population, those things are just on paper, one week of fasting after one month of two loaves of bread a day menu and you will see how easily people can suddenly forget everything, from religion to the name of their ancestors. It's quite funny actually, you dismiss the case of Japan because well, not everyone can change their way like that,  while at the same time we're here on Bitcointalk where we talk about changing the whole way the economy works, in the whole world, isn't that contradictory much?

Therefore, there is no reason to mention the issue that some inflation factors are outside the Fed's control.

I see it as a valid reason, I mention it, simple as that!
People can stop inflation themselves, it only needs a gentle push and the FED won't be able to do a thing about it, if everyone would simply cut their expenses you're going to see prices and inflation going down, deflation can be triggered easily if the absolute majority wants it and are prepared for it.

[Hydrogen]

WASHINGTON (Reuters) -Cleveland Federal Reserve Bank President Loretta Mester said it will take two years for inflation to fall

Two weeks of lockdowns to flatten the curve (COVID).

Two years of inflation to flatten the debt cycle.

I think we've all heard this before.

They say history repeats itself due to people refusing to learn from past history.

Is it more astonishing that people believe they're better off not knowing history. Or is it more astonishing that governments and politicians have used many of the same tactics and strategies for thousands of years, without the majority of people learning to recognize and adapt to them?

Voltaire is famous for saying fiat currency always returns to its intrinsic value of zero. There was a considerable historical precedent behind him making these claims. So it appears history may repeat itself again. And people will be taken by surprise if it happens. Despite it occurring frequently throughout history.

Roughly 1,500 years ago the roman empire suffered from a hyperinflating denarius. And it seems today people may experience similar conditions. Without connecting the dots between past and present.

[Darker45]

Of course, all these measures taken up to counter the rising inflation won't be effective overnight. It will take time. The effects will slowly trickle down to the bottom. Not to mention that even if there are efforts for recovery, the problems are not yet gone. They're still here. COVID is still around, with new variants still forming. The Russian invasion isn't over yet even if the Russian army is already pushed back. And the global effects of these two are still felt by the world.

But I don't think there will be a recession even if the Fed fails to pull down inflation to 2% within the next couple of years. Perhaps there'll be very low growth as compared to the target. At most, there'll probably be a slight decrease in GDP, but will just be temporary to be considered recession.

[Lucius]

• Do you think that the Federal Reserve has enough power to control inflation within 2% over the next two years?
• Do you think Fed can do that without causing a recession that may last for several years?

They can do whatever they want, for the common man they are the gods on the throne who decide in which direction their nation will go, but unfortunately also the direction in which most of the world will go. From all that can be read, such measures inevitably lead to a recession, and it seems that this is their goal - and not only for them but also for other governments in the world that are making almost identical moves.

When you say that the recession could last for several years, I think its consequences will be felt at least until the end of this decade - because the war on the Eastern European border and the statements coming from the aggressors clearly indicate that they want much more than they have now. The EU without cheap oil and gas and with green ideologies will not do well in all this, which will probably bring to power various radical and anti-EU politicians.

The example of the recently concluded parliamentary elections in France speaks volumes about how things are changing - the Macron party lost an absolute majority, and Marine le Pen won as many as ten times more MPs than in the last elections.

They're still here. COVID is still around, with new variants still forming. The Russian invasion isn't over yet even if the Russian army is already pushed back. And the global effects of these two are still felt by the world.

Covid will not be a problem for at least another 2-3 months in the northern hemisphere during the summer, and restrictions and new vaccinations will probably start again in the fall. As for Russia and its intentions in Ukraine, not everything is as it seems - because the Russians have almost everything they really wanted - everything else was a smokescreen and a tactical stretching of Ukrainian forces.

[kryptqnick]

I, to be honest, thought that 5% inflation rate was considered pretty good, so is 2% even a desirable target? Maybe it won't get there, but if it gets below 5%, isn't it alright? I mean, not in general, because money devaluating is basically a hidden tax, but in terms of how fiat works and how it's argued that some inflation is good to motivate people to spend money instead of hodling. And also, I think the focus should not be on inflation and decreasing rate of economic growth, but things like redistribution of goods, better social policies etc.

[el kaka22]

It is normal to not fall to those levels that quickly. In fact, it could even hurt you if it hurts that quickly, meaning if the prices stay that way and do not go up, the growth would be stopped and that would hurt the economy as well, nobody would make a profit.

Definitely 2% is great, but it is great when it is there forever, if you could lock it for the next 100 years that would be insanely great. But if you go to 7%+ and your gas prices increase to a whole new record levels, then making the inflation 2% again could hurt more than it helps. This is why it needs to be dropping small by small, lower and lower, which will make sure that eventually it will be there but since it has been a while, everyone will be ready.

[Ultegra134]

It is normal to not fall to those levels that quickly. In fact, it could even hurt you if it hurts that quickly, meaning if the prices stay that way and do not go up, the growth would be stopped and that would hurt the economy as well, nobody would make a profit.

Definitely 2% is great, but it is great when it is there forever, if you could lock it for the next 100 years that would be insanely great. But if you go to 7%+ and your gas prices increase to a whole new record levels, then making the inflation 2% again could hurt more than it helps. This is why it needs to be dropping small by small, lower and lower, which will make sure that eventually it will be there but since it has been a while, everyone will be ready.

That is correct, rapid deflation isn't healthy for the economy either. I highly doubt that it'll happen in 2 years as OP mentioned, a couple could possibly mean more than 3-4, which is a more realistic approach. As long as the war continues, we're going to have a huge burden on the economy, which is also susceptible to worsen in the future if action isn't taken with oil, wheat and electricity.

[Fortify]

WASHINGTON (Reuters) -Cleveland Federal Reserve Bank President Loretta Mester said it will take two years for inflation to fall to the central bank's 2% target, adding that it will be "moving down" gradually from the current level.

A surge in inflation, which is at its highest level in 40 years, has made hawks of nearly all Fed policymakers, only one of whom dissented earlier this week against what was the central bank's biggest rate increase in more than a quarter of a century.

"It isn't going to be immediate that we see 2% inflation. It will take a couple of years, but it will be moving down," Mester said in an interview with CBS News on Sunday.

Mester said she was not predicting a recession despite slowing growth.

"We do have growth slowing to a little bit below trend growth and we do have the unemployment rate moving up a little bit. And that is OK, we want to see some slowing in demand to get it in line with supply," Mester added, referring to forecasts submitted in the past week by participants of the Federal Open Market Committee's meeting.

Policymakers currently expect to raise the Fed's benchmark overnight interest rate, now in a range of 1.50%-1.75%, to at least 3.4% in the next six months. A year ago, the majority thought the rate would need to stay near zero until 2023.

On Friday, the Fed called its fight against inflation "unconditional."

Source: https://www.investing.com/news/economy/feds-mester-says-it-will-take-2-years-until-inflation-falls-to-2-target-2838671

• Do you think that the Federal Reserve has enough power to control inflation within 2% over the next two years?
• Do you think Fed can do that without causing a recession that may last for several years?

Inflation that is happening now is linked to several factors that the United States may not be able to move well, so Fed should be careful about monetary policy, analyzes indicate an interest rate of at least 3.4% in the next six months, which means more rate hikes of about 50 basis points each meeting in the coming months.

You have to question the intelligence and long term planning of central banks if history is anything to go by. At best when everything is going steady and things look all rosey then they have no issues predicting more of the same. However they always seem to be stung and very inaccurately forecast big problems before they happen, often simply reacting to events that you'd imagine they are paid to manage in advance. Apparently nobody could have predicted the runaway inflation that we're seeing now and the policymakers are struggling to catch up to current events, raising interest rates by large amounts in an effort to tame inflation but it also looks like they're acting too slowly again.

[edgycorner]

Do you think that the Federal Reserve has enough power to control inflation within 2% over the next two years?

The Federal Reserve has the power to control inflation by 2% over the next two years(like by increasing the interest rate,money supply, other monetary tools). However, it is not clear if the Federal Reserve will be able to achieve this goal. Inflation has been increasing recently and there is a risk that it will continue to do so. If it continues to increase then it makes the Federal reserve impotent    Which will make it difficult for the Federal Reserve to reduce inflation to 2%.

Do you think Fed can do that without causing a recession that may last for several years?

Impossible.
The Federal Reserve is tasked with maintaining price stability and maximum employment. In order to achieve these goals, the Fed uses monetary policy tools such as interest rates to manage the economy. Raising interest rates is a way to slow down the economy and reduce inflation. However, it also risks causing a recession. Fed policymakers are aware of this risk and believe that the current rate increase is warranted given the current economic conditions. The recession is here to stay for a long time