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Goolsbee Talks Down U.Mich Inflation Expectations Lift

FED
  • Liesman on U.Mich inflation expectations numbers coming out on the high side today [1Y increased from 3.2 to 3.5%, 5-10Y from 3.0 to 3.1%].
  • Goolsbee: In the world of central banks, inflation expectations have a prized place. The un-anchoring of inflation expectations bodes awful for progress on inflation. Before central banks established inflation credibility (after the Volcker Revolution), rising inflation expectations made targeting inflation doubly hard. … Even at the moment when actual inflation got to almost 10% in the economy this year, these measures of inflation expectations never went up – there was a fundamental sense in which the markets believed the Fed. That’s critically important.
  • [Specifically on U.Mich when pushed] The short-run expectations isn’t what matters – the long-run is what matters. The short-run measure is a markets-based guide after inflation went up earlier this year. What I mostly take from that was that despite hitting that inflation bump, the widespread view is not that inflation is taking off.
  • Are you worried about inflation getting entrenched in the long-run at 3%?
  • Goolsbee: There isn’t at this time much evidence in my view that inflation is stalling out at 3%. If you take a step back, inflation went way up in the US and everywhere else in the US. [Repeats longer run disinflation arc angle after healing of supply shock through 2023 from previous appearances]. We’ve hit this bump and now we wait.
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