Fed Schmidt: Eliminating the energy inflation that is still overstretching supply and demand imbalances is the cause of inflation

On 5 August, the Fed Schmidt said: “Our inflation is not just about energy. The de-inflation target of energy remains well above 2 per cent, revealing potential trends in the data. This trend is not in our interest. In the six months leading up to June, the monthly rate of inflation at which energy was removed has been higher than required to achieve the inflation target. Over the past 12 months, energy-free inflation has been 3.2 per cent, about 0.5 percentage points higher than last June. Inflation has continued to be too high in broad and expanding areas of goods and services. There are many factors driving inflation. Reading the economic reviews reveals that the focus of recent attention has been on supply shocks. These shocks include negative supply factors associated with shipping interruptions, oil and tariffs, all of which push up prices. I am very cautious about this comment and reject the tendency to attribute our inflation problems solely to supply shocks. While supply is indeed a problem for some commodities, inflation is always the result of a balance between supply and demand and between the two.” Kim Xian