"Ladies & Gents, this is your Captain speeking. Runway ahead & can expect a smooth, or as some call it, a "soft landing"".
Hope, my "navigator", Mr. Waller, stops mumbling incoherently about the need to further lift the "plane´s nose up"
Some “passengers”, however, don´t believe the Captain. One example is Matt C Klein, the “Overshoot guy”, who says:
The continuing unwind of pandemic-related and war-related disruptions to consumption, production, and distribution is helping inflation. But that may be temporary. Markets are not discounting this.
Another is one of the Captain´s own officials, Governor (“navigator”) Christopher Waller, who wants to “further lift up the plane´s nose”:
As things stand now, my outlook for the stance of monetary policy that will get inflation near the FOMC's 2 percent target is roughly consistent with the FOMC's economic projections in June. I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target.
A couple of pictures go a long way to describe the “landing scenario” that the Captain faces.
One important thing to note: The plane took off from “sea level” and is now on the verge of “landing” at an airport located at a “higher plateau” but with a “smilarly inclined runway” (4.5%, which is the runway´s “inclination” observed since the early 1990s).
What the Fed did, in fact, was to “pay a bribe” to the “air controlers” to guide the “plane” to an “airport” located at a higher plateau, as I argued here.
The next picture provides a different perspective (“one dimensional”) on the “landing” scenario, As it approaches the “runway”, it is slowing down to hit the runway smoothly and then “glide” along it. If that happens the “passengers” will give the Captain a big round of applause!
But there are those who “root” for a “crash landing”, a situation where the “Captain “Overshoots” the “high plateau runway”, trying to take the plane to the “sea level runway” from which it took off!
Such a maneuver would be “stupid”, because it would“negate” the reasons for having paid a “bribe” earlier! And as we know, the “sea level” runway from which the plane rose, was a “suboptimal” runway, “inherited” from the mistakes the Fed made in 2008-09!
Observation: The Fed has at its disposal information which it disregards, but which would be extremely useful to help it take the plane to a smooth landing. Of those, maybe the most relevant is the data available on Divisia Broad Money (Divisia M4) provided by the Center for Financial Stability. In conjunction with the montthly NGDP (& RGDP) data provided by S&P Global, the “Captain would be much better equipped to guide the plane”
Atlanta's gdpnow is at 3.9%. Divisia aggregates is below zero. Money demand (excess savings) is declining, velocity is up.