US Inflation is not "transitory" - Jan 21

[dan_s]

One of the primary reasons to invest in commodity-based companies is that inflation will push up all commodity prices. Add shortage of supply and oil should easily pass $100/bbl. - Dan

By Simon Kennedy
(Bloomberg) -- Former Treasury Secretary Lawrence Summers
said he remains worried that policy makers are complacent about
inflation and he doubted U.S. consumer prices will return to a
2% pace of increases by the end of this year.
With investors expecting the Federal Reserve to next week
signal plans to raise interest rates in March, Summers said that
“the gravity of our situation is still understated” and that
bottlenecks in China, rising oil costs, more expensive housing,
tightening labor markets and low borrowing costs all pointed to
continued price pressures.
“While the term ‘transitory’ has left the policy maker
discourse, the idea of transitory inflation is still very fixed
in their minds,” Summers told Bloomberg Television’s “Wall
Street Week” with David Westin. “There’s still a belief that
with very limited monetary actions -- that have not taken full
effect -- we will see inflation slow to the 2% range by the end
of the year. That certainly could happen, but it wouldn’t be my
bet.”
The consumer price index rose 7% in the 12 months through
December, the most in almost 40 years, putting more pressure on
the Fed to sharply tighten monetary policy. The Fed in December
signaled it’s likely to raise interest rates by three-quarters
of a percentage point and begin trimming its $8.9 trillion
balance sheet this year, but many investors and economists agree
with Summers that it will need to be even more aggressive than
that.
“The Fed’s got a very delicate operation now in slowing it
down,” said Summers, a professor at Harvard University and paid
contributor to Bloomberg. “The delicacy of that operation is
underscored by the turbulence in asset markets since the
beginning of the year.

Yellen’s Outlook

Janet Yellen, the current Treasury chief and former Fed
chair, told CNBC this week that while she expected inflation to
remain north of 2% for most of this year, “if we’re successful
in controlling the pandemic I expect inflation to diminish over
the course of the year and hopefully to revert to normal levels
by the end of the year, around 2%.”
Read More: Yellen Still Hopes U.S. Inflation Gets Back to
2% by Year-end
“If we’re going to have maximum employment and growth over
time we’re going to need to control the growth of total incomes
-- so that more of it can go into more employment and more
output and less of it into inflation,” said Summers. “I don’t
think it’s the best bet that inflation is going to come into the
2% range by the end of the year. Complacency is not
appropriate.”
The former Treasury chief did praise the Fed for its
“thoughtful, cautious approach” to the debate over whether it
should create its own digital currency. The Fed this week issued
a 35-page discussion paper on a government-backed coin, known as
a central bank digital currency, or CBDC, marking its most
significant action yet as it seeks to dive deeper into digital
assets.