The Federal Reserve is making a mistake in its dogmatic stance against inflation Ark Investment Management’s Cathie Wood said Monday in an open letter to the central bank.
Instead of looking at employment and price indexes from previous months, Wood said the Fed should rely on commodity prices that indicate the biggest economic risk going forward is deflation, not inflation.
“The Fed seems focused on two variables that, in our view, are lagging indicators –– downstream inflation and employment ––both of which have been sending conflicting signals and should be calling into question the Fed’s unanimous call for higher interest rates,” Wood said in the letter posted on the firm’s website.
The consumer price and personal consumption expenditures price indexes both showed inflation running high. Headline CPI added 0.1% in August and was up 8.3% year over year, while headline PCE rose 0.3% and 6.2%, respectively. Both readings were even higher excluding food and energy, which saw large price drops over the summer.