Inflation in Europe and USA, Voice of Reason from Jackson Hole

Yesterday's data on consumer inflation in the Eurozone showed very clearly that high inflation is not just a temporary phenomenon in a single US economy. And the problem is quite systemic. Annual inflation of 3% for Europe is the highest rate of price growth in the last 10 years. With each such publication, Powell, with his position of "temporary inflation", looks more and more ridiculous.

Speaking of inflation in the United States. Yesterday was also published data on the growth rate of prices in the US real estate market and lo and behold - prices have reached their highest levels over the past 30 years (that is, in the entire history of the Case-Shiller index). So yes, inflation is clearly temporary.

True, for some reason US consumers do not think so. A couple of weeks ago, researchers at the University of Michigan demonstrated that consumer sentiment in the United States is a little more than completely dull. And yesterday the data on the Conference Board Consumer Confidence Index were published. Consumer sentiment collapsed to the level of the month of February. The reasons are rising prices and a pandemic.

Against the background of all this information, the speech of Don Cohn, the former Deputy Chairman of the Federal Reserve for Financial Supervision, sounded like a kind of echo of reason. So he said that the financial system has accumulated a critical mass of risks and something needs to be done about this, and urgently. He noted that the United States fully used the potential of the FRS and the Government to rescue the economy from the crisis. There is nowhere to soften monetary policy, the budget deficit is already 3.5 trillion, that is, expanding fiscal incentives is also not an option. And he asked a very logical question: if there is a crisis tomorrow, how and at what expense will you save the economy?

The context of this issue lies in the plane of Powell's last speech, for whom the current version of monetary policy is the optimal strategy. In general, absolutely everything (economic data, experts, security considerations) indicates that Powell needs to change his worldview, and the time has come to adjust monetary policy in the United States.