WASHINGTON, Aug 14 (Reuters) – Pessimists watching the Federal Reserve battle inflation have focused on the so-called “last-mile” problem, convinced a full return to the U.S. central bank’s 2% inflation target will require a recession and significant job losses to cool ongoing price rises.
History is on their side, with academic studies and other research concluding the levels of inflation seen over the last two years can’t be fixed without a downturn, and prominent economists projecting a jump in the U.S. unemployment rate to between 5% and 10% from the current 3.5% – with millions out of work – might be the price that’s paid.
As a counterpoint, however, Brent Meyer, the Atlanta Fed’s assistant vice president and chief inflation watcher, suggests in a new analysis that the road to 2% inflation may in fact be smooth, rather than filled with the setbacks and difficult choices many Fed officials have said they expect.
It’s true that some of the main headline price measures have been sticky. The personal consumption expenditures price index stripped of food and energy was stuck in the comparatively high 4.6%-4.7% range for six months before finally falling in June to 4.1%, a fact some policymakers took as evidence the return to the Fed’s target would be slow.
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Source: www.reuters.com
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