Will the Fed Fall Behind Inflation?

Different members of the Fed spoke further last week about their policy change to how they view inflation. Here is an example-The Phillips Curve which stated that a falling unemployment rate would lead to higher wages and thus higher inflation. But, this has not happened over the last 10 years at least. And the Fed is now saying that they will not raise short-term rates simply because unemployment rates drop "too low".

However, I believe the Fed is ignoring the HUGE demographic changes happening in our country. One very large reason why wages stagnated over the last 10 years is so many older Americans retired and they were replaced by Millennials earning far less. A Baby Boomer may have been making $40 an hour when they retired and their employer was able to replace them with a Millennial earning $25 or $30 an hour. But as there are fewer Boomers retiring this demographic change will evaporate and we will start to wages rising more quickly I believe.

Thus, the Fed could get really far behind inflation like they did in the 70's before Paul Volcker saved us from Stagflation and double-digit inflation and interest rates. Many of my older readers will remember mortgage rates over 10% and if the Fed gets too far behind inflation this might happen again.