Raphael Bostic and the dreaded word "transitory"

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In a recent speech, Atlanta Fed president Raphael Bostic brought out the swear jar he keeps in his office. Except this jar is a swear jar with a difference: Staffers (and, of course, Bostic himself) have to put a dollar in every time they use the dreaded word "transitory."

Why it matters: As White House press secretary Jen Psaki says, no one really knows what the t-word word means.

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  • It's generally (over)used in the context of inflation — with the idea being that if inflation is transitory, then the Fed doesn't need to do anything about it, because it will naturally move back down to its long-term trend anyway.

  • The problem is that the "transitory" thesis is unfalsifiable, both in theory and in practice — at least if you think that above-trend inflation for a year or two can count as transitory.

The big picture: Insofar as inflation is being driven by supply-chain disruptions and/or labor shortages, it's hard to see how monetary policy could bring it down in any event.

  • My thought bubble: Maybe what Bostic really needs is not a swear jar so much as the serenity to accept the things he cannot change.

Go deeper: Bloomberg's John Authers has a deep dive into the most recent inflation figures. They're very high on a 12-month basis, but unexceptional on a 24-month basis, compared to a pre-pandemic baseline.

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