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Rising Inflation, Four Rate Hikes, Financial Repression on Menu in 2017: Fed Heads

wolfstreet.com / by Wolf Richter / Mar 20, 2017

Bondholders, savers, consumers to be put through inflation wringer.

Inflation will rise above target, and that’s OK, the Fed heads who’ve been talking since last week’s meeting said. The Fed will hike rates, maybe faster than expected, but they won’t catch up with inflation, keeping the Fed purposefully behind the curve, and inflation will overshoot, and real interest rates will be deeply negative, whether you like it or not. That’s the Fed’s message emerging since the last meeting.

Today, Philadelphia Fed President Patrick Harker and Chicago Fed President Charles Evans echoed Fed Chair Janet Yellen who’d suggested on Wednesday that the Fed could try to push inflation above the 2% “target.”

But the Fed’s measure of inflation is the Personal Consumption Expenditure index (PCE index), which is significantly below the Consumer Price Index (CPI) which already jumped 2.74% in February, year-over-year.

Harker and Evans are the first Fed heads to talk since the Fed’s policy-setting committee (FOMC) last week raised the target for the federal funds rate a quarter point to a range of 0.75% to 1.0%.

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