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The US economy’s biggest question isn’t if sky-high inflation is temporary, it’s how long the Fed can stomach the soaring prices

Federal Reserve Chairman Jerome Powell

Summary List Placement

Today’s inflation debate, largely over whether the run-up is transitory or not, is a distraction. It’s not about the inflation per se, but how policymakers respond to it

The more pertinent discussion is the rate of inflation the Federal Reserve is willing to tolerate to achieve maximum employment. How high above their 2% target will the Fed let inflation get, especially if the labor market hasn’t recovered fully, before they raise interest rates? 

Viewed from this lens, there is good reason to think the Fed is willing to tolerate a bit more inflation than details ⇒

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