Jason Furman, ex-President Barack Obama’s (D) Council of Economic Advisers Chairman, wrote about four things about which to worry regarding the current inflation increase and its durability. Three of them were reasonably accurate. He also predicted a Fed response.

First, the economy is beginning 2022 with much tighter labor markets than a year ago. …
Second, demand should remain above pre-pandemic trends, while supply will likely continue to lag behind. …
Third, consumers, businesses, forecasters and financial markets all expect near-term inflation to be about 1 to 3 percentage points higher than a year ago. …

So far, so OK. But his fourth, not so much.

Fourth, the trajectory of Covid and its effect on inflation are highly uncertain.

In fact, it’s badly off the mark. What’s highly uncertain is the Federal government’s trajectory of variable, and often panic-hyped, (over)reaction to the Wuhan Virus. This one is beyond the ken of the Fed, or it should be, and is completely under the control of President Biden-Harris (D).

The Furman’s predicted Fed answer isn’t all that, either.

He [Fed Chairman and nominee for continuation as Chairman Jerome Powell] proved that the Fed’s actions will depend on the data, and the Fed is now on course to start raising rates in March. If inflation remains as high as I fear it will, expect him to continue to follow the data by pivoting further. Given the uncertainty, however, he should stay the course—for now.

No.

If the Fed is going to be serious about lowering inflation back into the neighborhood of its target rate of 2%, it needs to

• stop buying Treasury debt
• disgorge its existing Treasury debt instrument holdings (ideally by simply not rolling them at maturity)
• set its benchmark interest rates at levels historically consistent with 2% inflation
• sit down and be quiet instead of constantly trying to respond to every jot and tittle of market variation