With gasoline at $3.50, it’s easy to be surprised by Ben Bernanke’s seeming nonchalance regarding inflation, as is our Henry Blodget.
But sneering at Bernanke’s seeming inflation-blindness — which is something we hear every single day on CNBC and from other markets — isn’t going to do much good.
There’s no indication that the rise in energy and food prices are associated with monetary policy.
Food prices in many instances are closely connected to weather and other events, including the Russian wheat fires, the drought in China, and the floods in Australia and Brazil. What’s more, food inflation in the US isn’t very dramatic. Yes, the global commodity hike is not ideal for food vendors, but very little is trickling through to the end user. See more here on that.
As for gas prices, the first thing to note is that global oil prices are pretty obviously tied to the strength of the global market.
Here’s a look at oil prices vs. US economic leading indicators. It seems pretty clear what’s driving oil. It’s not monetary policy.
Here’s the thing: The Fed HAS acknowledged the rise in commodity prices, and the threat that poses to the economy. The last Fed minutes they were acknowledged.
But what the Fed should be looking at is measures that are under the influence of monetary policy. Tightening money isn’t going to do anything about food prices — in fact, it could make the problem worse if access to farm loans become more expensive, and the same goes for energy exploration.
Areas that might be affected by the Fed — housing, wages, etc. — clearly remain pretty subdues.