Reading the tea leaves seems easy for you as compared to Powell.
Powell
#1 “there was a time when monetary policy aggregates were important determinants of inflation and that has not been the case for a long time”
#2 “Inflation is not a problem for this time as near as I can figure. Right now, M2 [money supply] does not really have important implications. It is something we have to unlearn.”
#3 “the correlation between different aggregates [like] M2 and inflation is just very, very low”.
The concern is not the relationship between the CPI or PCE. It may be said that there is no single figure compiled which represents the value of money. Rather the concern is the relationship of money to the level and movement of prices.
It is a well-known fact that a rise in prices, if not too rapid and extreme, has a stimulating effect on business profit expectations. Acting under the impulse that wider profit margins are in the offing, businesses will go into debt, hire workers, buy additional inventory, expand their rate of operations, and if their optimistic anticipations cover a long enough period, decide to expand their plant capacity, and develop new outlets for their products.
Reading the tea leaves seems easy for you as compared to Powell.
Powell
#1 “there was a time when monetary policy aggregates were important determinants of inflation and that has not been the case for a long time”
#2 “Inflation is not a problem for this time as near as I can figure. Right now, M2 [money supply] does not really have important implications. It is something we have to unlearn.”
#3 “the correlation between different aggregates [like] M2 and inflation is just very, very low”.
The concern is not the relationship between the CPI or PCE. It may be said that there is no single figure compiled which represents the value of money. Rather the concern is the relationship of money to the level and movement of prices.
It is a well-known fact that a rise in prices, if not too rapid and extreme, has a stimulating effect on business profit expectations. Acting under the impulse that wider profit margins are in the offing, businesses will go into debt, hire workers, buy additional inventory, expand their rate of operations, and if their optimistic anticipations cover a long enough period, decide to expand their plant capacity, and develop new outlets for their products.