Tapering, Doubts about “Transitory” Inflation, and “Financial Stability Risks” due to “Valuation Pressures in Housing Markets”: Some Folks at the Fed Getting a Little Nervous

 Tapering, Doubts about “Transitory” Inflation, and “Financial Stability Risks” due to “Valuation Pressures in Housing Markets”: Some Folks at the Fed Getting a Little Nervous

“Supply disruptions and labor shortages might linger for longer and might have larger or more persistent effects on prices and wages than they currently assumed.”

By Wolf Richter for WOLF STREET.

Fed officials admitted they’d vastly underestimated the inflation surge, with doubts growing over its “transitory” nature, given the changes in inflation dynamics, including “labor shortages,” supply constraints, wage increases, and blistering demand. These factors might have a more “persistent” impact on inflation, according to the minutes of the FOMC meeting released today.

Tapering the asset purchases might start earlier than anticipated at the prior meeting. The housing market boom, fueled by “low interest rates,” is triggering concerns about “financial stability risks.” And tapering purchases of mortgage-backed securities “more quickly or earlier than Treasury purchases” is officially on the…

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