Bostic says Fed is going to be comfortable with a bit more volatility in inflation

tweet at 12:31pm: FED'S BOSTIC: INFLATION IS EXPECTED TO CONTINUE OVER 2% IN THE FUTURE. tweet at 12:30pm: ATL FED’S BOSTIC: TIME TO EXIT ‘EMERGENCY’ MON POL STARTING WITH TAPERING; PRICE STABILITY ‘COULD BE ON THE LINE IN COMING MONTHS' #Bostic #federalreserve tweet at 12:31pm: FED'S BOSTIC: LONG-RUN INFLATION EXPECTATIONS DO NOT APPEAR TO BE DANGEROUSLY UNHINGED YET, BUT THE FED WILL KEEP A CLOSE EYE ON THEM.Bostic: The Current Inflation Episode: Have We Met Our FAIT? Key Points • Atlanta Fed president Raphael Bostic speaks live to the Peterson Institute for International Economics on inflation on October 12, 2021. • Bostic says the pandemic has turned inflation on its head. The elevated inflation dynamics today are very different from what they were in the months prior to the pandemic. • Bostic says he and the Atlanta Fed believe that "episodic" better describes pandemic-induced price swings than "transitory." By this, he means these price changes are tied specifically to the presence of the pandemic and will eventually unwind by themselves. • He points out, though, that it is becoming increasingly clear that the intense and widespread supply chain disruptions that have animated price pressures will not be brief. • Bostic believes the real danger is that the longer the supply bottlenecks and attendant price pressures last, the more likely they will shape the expectations of consumers and businesspeople, shifting their views on pricing and wages in particular. • Bostic stresses that one of the overarching themes of the Federal Open Market Committee is data dependence. It is through this lens that he views flexible average inflation targeting, or FAIT. • Bostic believes current conditions argue for a removal of the Committee's emergency monetary policy stance, starting with the reduction of monthly asset purchases. Good afternoon. I have long admired the important work the Peterson Institute does, so it's a pleasure and an honor to be with you. Anyone who doesn't want to live in interesting times showed up in the wrong century. The COVID pandemic is the second tectonic (major) economic shock in these first 20 years of the 21st century—I'm counting the Great Recession as the first—and it may ultimately prove to be the most profound economic shock in our lifetimes. One critical economic element the pandemic has turned on its head is inflation. The elevated inflation dynamics we are experiencing today are very different from what they were in the months prior to the pandemic. Moreover, the durability of elevated inflation has become something of a contentious subject, and perhaps some of you have participated in some of these "debates." Today, I will spend my time with you discussing this extraordinary inflationary environment of recent months and how I am thinking about policy amid that environment.

tables