Dispelling Fed Inflation Myths

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July 30 (Bloomberg) -- On today's "Chart Attack," Merrill Lynch's Ethan Harris and Bloomberg's Adam Johnson look at U.S. inflation on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Time for turn attack, where we bring you a chart that will make you smarter.

Hopefully, it will eventually make you a bit of money.

Are closer is dispelling fed inflation.

He is a former fed economist.

I started my career there.

A good place to learn.

I started my career at merrill lynch.

Let's talk about this notion of inflation, and the mets.

Why do you call it a myth?

I think a lot of people have been looking at the fed balance sheet and been worried that it will create a lot of inflation explosion.

We have gotten a little bit of a pickup in inflation due to strong commodity prices.

Once that disappeared from inflation dropped back down again.

Let's bring in the camera and show people what is going on with inflation on the chart.

You have headline inflation, and then core, which excludes food and energy.

They are both under 1.5%. the bad -- the fed has agreed they want either to% inflation.

They want a cushion against inflation.

But we have -- against deflationary.

But we have been dropping at about 1.5% for year now.

We are actually too low on inflation.

It sounds crazy.

This is one reason the fed wants to be cautious and exiting from using monetary policy.

If i interpret your notion of this whole discussion been a myth, the myth is that we need to cut back on q e. let's think about what has happened.

The fed has put a bunch of reserves in the banking system.

That is not money.

It is not going into lending or to spending.

Greg is not circulating.

The multiplier is actually going down.

Very low.

Until the banks start lending aggressively, q e policy will not be inflationary.

Picking up at any moment has been misplaced.

We need to focus on a high unemployment rate.

The short-term drivers of inflation should be what we are focused on.

And that is the paul krugman argument, keep printing, because we have a growth problem, not an inflation 1.

This text has been automatically generated. It may not be 100% accurate.

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