26 Aug 2008

Fisher Says 50-50 Chance of High Inflation

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Perhaps the most sensible voting member, Dallas Fed President Fisher thinks there is a 50-50 chance our recent inflation spike is a “one-off” event:

“The real concern I have as a central banker is whether or not [inflation] begins to affect the mentality of spending patterns by consumers [and] pricing patterns by producers,” Fisher told Dow Jones.

“I don’t know the answer to that question – it’s sort of 50-50” whether the inflation gains will prove a “one-off event,” or something more persistent, Fisher said.

I realize Fisher is in a tough spot politically, and the above is probably the most controversial statement he can make without ruffling too many feathers.

As I will explain in forthcoming posts, I think there is a very real danger–I won’t insult you by assigning it a meaningless numerical likelihood–that the official CPI will grow by more than 10% during calendar 2009, at least if they calculate it the way they are now. (I.e., I’m saying that if the figures were supposed to be that high, the BLS might tweak the hedonic measures to bring the numbers down into more reasonable territory.)

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