, Columnist
If the Fed Is Right, Then Markets Are in Trouble
Meeting the 2 percent inflation goal could signal a downturn.
Rising inflation.
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Defying the best efforts of central banks over the last nine years, inflation has yet to rear its head. Although many would welcome inflation growth above 2 percent, the markets are flashing warning signs that a return to pre-crisis levels might not produce the expected results. Instead, such an increase could bring volatility, which is often a code word for falling markets.
On Jan. 25, 2012, the Federal Reserve aimed for 2 percent core personal consumption expenditures as a desired level of inflation. As the chart below shows, inflation has mostly remained well below this target. That was bad timing on the Fed’s part.