The author is the president of Queen’s College, Cambridge University and an advisor to Allianz and Gramercy

Once again, the widely watched inflation data is released surprise On the good side. The underlying drivers of inflation have expanded again. Once again, the most vulnerable parts of the population have been hit hardest.

Once again, those who have described this inflation event as “temporary” throughout the year seem to be reluctant to re-examine their beliefs, despite the fact that the data has always contradicted each other.

On one level, considering the usual circumstances, this hesitation should not be a huge surprise Behavior trap: In this case, they include inappropriate framing, confirmation bias, narrative inertia, and resistance to shame. However, in the face of repeated contradictory data, its continued existence has seriously increased the risk of economic, financial, institutional and social damage that could have been avoided.

according to data Data released on Wednesday showed that US consumer prices rose by 0.9% in October alone, well above the 0.6% expected median. This brings the annual inflation rate to 6.2%, again higher than the consensus estimate of 5.9%, the highest level in 31 years.

Given the price increases already in the pipeline, this abnormally high inflation may continue in the coming months. This week alone, the producer price index of China and the United States rose by 13.5% and 8.6% respectively.

Wage increases are also rising. Judging from the recent corporate earnings season, many companies are preparing for potential drivers-from supply chain disruptions, insufficient truck capacity and port congestion to high freight rates and labor shortages-these factors will continue. To next year.

It is not surprising that the persistent high inflation in recent months has begun to change behavior. Demand for wages in more industries is rising, as is the threat of strikes. Given the strong demand, the company feels more assured of raising prices. There are even signs that consumers buy in advance.

Although inflation continues to be higher than expected, further price increases, and a trio of behavioral changes, it turns out that the Fed’s description of inflation has been particularly slow. Therefore, monetary policy continues to lag behind the actual situation.

The central bank’s lack of a credible voice on inflation has also plunged the market into chaos. Witnessing the high volatility of the government bond market, even the most sophisticated and sophisticated investors have been affected.

The Fed’s hesitation is a major risk to economic and social well-being. By saying this, I am fully aware that reducing emergency-level monetary policy stimulus will not solve supply chain disruption and labor shortages, which are the two main reasons for accelerating cost-driven inflation.

However, due to the persistence of extremely loose monetary policy, record loose financial conditions (according to the weekly Goldman Sachs index) and the lack of adequate forward-looking policy guidance.

It will also support the Fed’s view that it is bound by financial markets, especially given its relatively loose regulatory stance and its insensitivity to the continued deterioration of inequality.

There are many stakes here. The later the Fed relaxes its monetary stimulus accelerator, the more likely it is to apply the brakes more aggressively in the future. This will unnecessarily undermine the need for a strong, inclusive and sustainable economic recovery.

By undermining macroeconomic stability, this will also make green financing and other climate initiatives more difficult to follow, and will place more obstacles on the path to the Biden administration’s ambitious economic agenda. Inflation will continue to hit low-income families particularly severely. The soaring food and gasoline prices have been deducted from the family budget.

Unfavorable risk scenarios are also increasingly worrying. The more the Fed lags behind, the greater the threat of it becoming the driving factor of three of the four simultaneous contraction forces in the middle of next year (if not earlier): rising interest rates, financial market instability, and a decrease in the real value of household savings And the erosion of fiscal stimulus.

If these are achieved at the same time—and the possibility is rising—the U.S. economy will eventually fall into an avoidable recession while dragging down the growth rate of the rest of the world. Although this will reduce inflation, doing so will pay a huge price.

This week’s inflation data magnified the alarm bells that have been sounding for some time. Let us hope that this time, the alert will prompt the Fed to take additional monetary measures to accelerate the reduction of the timetable for large-scale asset purchases starting next month.

The good news is that there is still a window for effective adjustment of monetary policy. The bad news is that the window has narrowed and become uncomfortably small. If action is not taken in time, the Fed’s increasingly discredited “temporary” character will be transformed from one of the worst inflation calls in decades into a major policy error, causing widespread and unnecessary damage, especially to the worst in society. Vulnerable groups.