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Is Inflation Transitory? What was the Fed thinking?

With regard to inflation, the lens used by Fed is filtered with PCE, and perhaps that is a problem for many Americans.

ELAINE analyzed Fed Chair J. Powell's meeting with Congress. Excerpts of Focus:

"The Fed's policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system."

Per ELAINE's ACT, Fed's concern is about employment and less on stable prices. For "stable prices", it is not a concern as transitory (PCE) inflation has little impact on "stable prices". If inflation is strictly being considered from PCE perspective, Fed Chair was right. Unfortunately, Americans are feeling the heat of inflation outside PCE. He said during the meeting:

"In particular, despite progress, joblessness continues to fall disproportionately on lower-wage workers in the service sector and on African Americans and Hispanics.. . The Fed pursues monetary policy aimed at fostering a strong, stable economy that can improve economic outcomes for all Americans"

For the part of inflation under consideration (PCE), it is transitory:

"Inflation has increased notably in recent months. This reflects, in part, the very low readings from early in the pandemic falling out of the calculation; the pass-through of past increases in oil prices to consumer energy prices; the rebound in spending as the economy continues to reopen; and the exacerbating factor of supply bottlenecks, which have limited how quickly production in some sectors can respond in the near term. As these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal."

Takeaway from ELAINE analysis:
When houses are bought or rental leases signed, it is not transitory. But that is not in Fed's definition of inflation.

ELAINE analysis of transcript of Chair J. Powell Response to the Coronavirus Pandemic (2021/06/22). Click to view details