by Jennifer Schonberger
Yahoo! Finance
A fraught word resurfaced in the Federal Reserve’s lexicon again this week: “transitory.”
It came from Fed Chair Jerome Powell, who told reporters Wednesday his “base case” is that higher inflation stemming from President Trump’s tariffs will be “transitory” — reviving memories of how central bank policymakers talked about inflation during the early stages of the COVID-19 pandemic.
Because Fed officials expected pandemic-era inflation to be transitory, they argued there was no reason to raise rates aggressively — an expectation that turned out to be misguided as inflation rose to a four-decade high in 2022. The Fed eventually mounted the most aggressive campaign to bring inflation down since the 1970s.