The Fed Talks Inflation

Last week Fed Chairman Powell spoke in front of Congress and said the large price increases are primarily the result of temporary supply bottlenecks and the fact that prices fell sharply last spring at the beginning of the pandemic, thus making inflation today look much higher or hotter. Still he did admit, “inflation has been larger than we expected and they may turn out to be more persistent than we expected.”

After this, Atlanta Fed President Raphael Bostic, said higher inflation readings may last for 6-9 months. Further, he said “three or four months” of continued strong job gains could cause the Fed to consider pulling back on bond purchases. It’s believed that the Fed will pull back from buying mortgage bonds first and this could happen in the 4th quarter, leading to higher mortgage rates then.