A flurry of recent reports highlighting a surge in the price of raw materials , commodities and crops has set off alarm bells in some quarters. Emergence of labor shortages alongside upward wage pressure has provided inflation worriers with further cause for concern. Some are drawing parallels to the inflationary dynamics prevalent in the 1960s and fretting about a potential replay of the "1970s Great Inflation" episode . The Federal Reserve (the Fed), meanwhile, is betting its hard-earned credibility on the notion that any inflationary surge will prove to be temporary. The Powell Fed has ruled out any sort of monetary tightening in the near-term as officials remain convinced that most price shocks will be transitory. The central bank even appears willing to tolerate above-target inflation rates for a while in order to achieve a full labor market recovery. A recent speech by Mary Daly, president or the Federal Reserve Bank of San Francisco, clarified the central bank's policy stance: "We will need to continually reassess what the labor market is capable of and avoid preemptively tightening monetary policy before millions of Americans have an opportunity to benefit. These efforts are critical to support the broad economy and aid the… Read full this story
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