Fed chair Jerome Powell on the meaning of transitory inflation

What he’s saying: “Transitory is a word that people have had different understandings of. For some, it carries a sense of ‘short-lived,’ and that there's a real-time component, measured in months,” Powell said at the Fed press conference.

• He went on to say that, for the Fed, it’s not so much a measurement of time — but rather a question of whether the current trend of rising prices will lead to “permanently or persistently high inflation.”

In other words, if inflation is transitory, then “there may be a cyclical storm on the surface, but … it won't leave behind structural pressures on the economy,” Daniela Mardarovici, co-head of U.S. multisector fixed income at Macquarie Asset Management, tells Axios.

The big picture: Many have taken sides in the argument over whether inflation is transitory (as the Fed says it is) — with or without a common understanding of what that means.

• The Fed’s view on it informs if and when it will take extraordinary measures in the economy, like raising interest rates from emergency, rock-bottom levels.

The bottom line: Providing more of a window into how he views the concept helps Powell’s credibility — and the markets seem to buy it so far.

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