(Ticker) – “I do not attribute the persistence of inflation to a lack of credibility from the Fed. Indeed, there is evidence to support central bank credibility, including that long-term inflation expectations are not far from the FOMC’s 2% target,” he said. Philip Jefferson, a member of the Federal Reserve Board of Governorsduring an event in New York.
Jefferson pointed to the “persistent mismatch between labor supply and demand,” which “combined with the large labor cost share in the services sector, suggests that high inflation could come down only slowly“.
The economist also stated that the current situation is different from past episodes of high inflation in at least four ways.
“First, the pandemic has created unprecedented disruptions in global supply chains,” he explained. “Second, the pandemic is having a lasting effect on labor force participation rates. Third, central bank credibility is higher today than it was in the 1960s and 1970s Fourth and most importantly, unlike in the late 1960s and 1970s, Federal Reserve is addressing the explosion of inflation quickly and strongly to maintain that credibility and to keep long-term inflation expectations well anchored.