The headline should match the article
By Scott Sumner
Headlines are typically not written by the same person that pens the article. Nonetheless, the headline should at least match the content of the article. Bloomberg failed with this headline:
Treasury Traders Are Doubtful Powell Can Drive Inflation Higher
I was surprised by this headline, as the Fed obviously can drive inflation higher. Perhaps they meant that Powell cannot convince the FOMC to drive inflation higher, but that would be an odd way of phrasing that claim.
The article itself is excellent:
The Treasury market has set a high bar for the Federal Reserve to jump in order to recharge inflation expectations and upend a bullish tone that has surfaced since Chair Jerome Powell laid out a new plan to allow consumer prices to run hot.
Bond-market gauges of inflation expectations have declined for the past two weeks, signaling traders are demanding that Fed policy makers deliver more information about how they will engender a rise in inflation. Benchmark 10-year yields have fallen to below 0.70%, helped also by haven demand as lofty U.S. stock prices turned lower.
Many economists predict Federal Open Market Committee members won’t take any new actions when they wrap up a two-day gathering on Wednesday, an outcome likely to embolden bond bulls and further crimp inflation expectations. . . .
“The market definitely needs more from the Fed now,” Aneta Markowska, chief U.S. financial economist at Jefferies, said by phone. “The Fed will be undershooting on inflation for the better part of four years, so why wait to do more? And inflation expectations have already been fading.”
Markowska’s absolutely right; the Fed should adopt a more expansionary monetary policy. A dramatic boost in QE would be a good start, although other tools are also available. So why don’t they?
The headline should have read:
Treasury Traders Are Doubtful Powell Will Drive Inflation Higher
If the Fed fails to adopt a more expansionary monetary policy in the near future, it will be a tacit admission that the average inflation targeting policy is not serious. The Fed is facing the possibility of a very serious policy failure—I hope they understand that fact.
PS. Of course it’s theoretically possible (albeit exceedingly unlikely) that the Fed cannot raise inflation. But that hypothesis is not even worth entertaining until they’ve done all they could and failed. In all of human history, no (fiat money) central bank has ever exhausted its ability to inflate. The Fed is not about to do so.