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Inflation remains way too high


The United Nations Conference on Trade and Development says that the Federal Reserve should stop raising interest rates. UNCTAD Secretary-General Rebecca Grynspan says, “There is still time to step back from the edge of recession.”

UNCTAD and its secretary-general are wrong. Every nation acts in its own self-interest. Moreover, the economic self-interest of the United States promotes the economic well-being of the global economy. Price stability promotes economic efficiency. A strong U.S.
economy is essential for global trade and free market capitalism. High inflation is destabilizing. Price stability, strong growth, and the basic fundamentals of capitalism and free trade are in the interest of the U.S. and the world.

The unfortunate truth is that the Federal Reserve remains far behind the curve on fighting inflation. The inflation outlook is becoming darker, not brighter. The Federal Reserve must keep raising interest rates. To do otherwise would undermine the basic fundamentals of a robust economy.

Economists at the Federal Reserve Bank of Cleveland forecast inflation. Their data indicate core inflation, as measured by the personal consumption expenditure price index, the Federal Reserve’s preferred metric, is rising, not falling.

The bank updates its forecasts several times a week. They see core personal consumption expenditure price inflation at 0.40% for September 2022. The actual inflation information as compiled by the Bureau of Economic Analysis will be reported on Oct. 28. More disturbingly, the Cleveland Federal Reserve sees core personal consumption price inflation for October at 0.42%, an increase (not a decrease) from September. The October inflation data will be reported at the end of November.

Though the Federal Reserve focuses on core personal consumption expenditure inflation, the public, the media, and the markets place more emphasis on the consumer price inflation index. There, too, the Cleveland Federal Reserve sees inflation rising (not falling) over the next two reporting months: core CPI at 0.51% for September and 0.53% for October.

On an annualized basis, the Cleveland Federal Reserve sees core personal consumption expenditure inflation rising at 5% for both September and October. It also sees core consumer price inflation increasing at more than 6% for both September and October. The Federal Reserve targets 2% inflation. It is far behind in fighting inflation. It must continue to raise rates aggressively.

Want more bad news?

The Federal Reserve Bank of Atlanta forecasts wage inflation. The Atlanta Federal Reserve sees wage inflation above
. The secular growth rate in U.S. productivity is in the range of 1-1.5%. When wage growth exceeds productivity growth by a wide margin, inflation is embedded and economic efficiency is at risk. So let me emphasize once again: The Federal Reserve must continue to raise interest rates aggressively. A 75-basis-point increase in interest rates seems inevitable at the next meeting of the Federal Reserve, scheduled for Nov. 1-2.

The inflation genie is out of the bottle. Economic theory and history say that inflation must be crushed in order to ensure economic efficiency and shared prosperity.


James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes
a daily note
on finance and the economy, politics, sociology, and criminal justice.

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