The job description of the central banker demands a subtle sense of semantics: a misplaced word or a phrase misused can move markets and tip economies. This holiday season, it seems, Jerome Powell, Chairman of the US Federal Reserve, will be spending his days reflecting on the meaning of the word “transient.”
Until 2021, as the world struggled to recover from the covid-19 pandemic, Powell and other Fed officials described the price hike as part of a transient inflation pattern. But on November 30, Powell said he wanted to withdraw the word. He was not doing his job, he explained during his testimony before the Senate Banking Committee. “Now is probably a good time to take that word out and make it clearer what we mean.”
The debate around inflation this year has revolved around the “transitory” and its interpretations; those outside the wobbly world of economics seem to infer quite a different meaning from Powell’s. The tension shows how difficult it is to communicate what is happening to prices during a pandemic that has shifted consumer demand from services to goods and blocked global supply chains. But it also shows the limits of the English language to describe the complex and abstract phenomenon of inflation.
What does transitory inflation mean?
The Fed used the term “transient” to suggest that rising prices at the current rate would not leave “a permanent mark in the form of higher inflation,” Powell said. Economists have split into a “transitional” team and a “persistent” team to determine whether or not high inflation will last beyond the pandemic pressures that support the supply chain. But too often, said Powell, people interpret the word as a signal of duration: “a sense of [the] of short time.”
And since brevity is in the eyes of the beholder, the Fed’s repeated use of the word “transient” has started to stir up impatience. In October, Urban Dictionary provided its own definition of ‘transient’: ‘Word used by the Federal Reserve to describe’ perpetual ‘.
It’s not as if Powell is rethinking what the ongoing price hikes mean. “Basically his perspective hasn’t changed on what’s going to happen to inflation next year,” said David Beckworth, a former international economist at the US Treasury Department. “The problem is, transient for many means that inflation would rise for a few months this year, then decline for a few months, and if that’s the popular definition, then yes, transient has passed its lifespan.”
We need a different adjective for inflation
For most economists who talk about transitory inflation, the intention is to describe something transitory and impermanent, Beckworth said. When the pandemic subsides, they want to make it clear, inflation will fall back to close to the Fed’s target of 2% inflation on an annual basis. So what’s the right word to describe it?
Beckworth didn’t come up with a phrase or word to sum it all up. Riccardo Trezi, former Fed and European Central Bank (ECB) economist, suggested: “You can call it the inflation trend, core inflation, inflation expectations,” pointing out that the Main problem with “transient” is that the word “doesn’t communicate how persistent something can be. “
Across the Atlantic, Christine Lagarde, President of the ECB, uses the word “temporary”. But another term, closer to Powell’s meaning, appeared in remarks Philip Lane, the ECB’s chief economist, made last month. “This period of inflation is very unusual and temporary, and is not a sign of a chronic situation,” Lane said. The term “non-chronic” captures something of the Fed’s idea: that inflation today is not systemic, and will not persist for long.
German has words for everything, even to describe inflation
Or maybe Powell could take inspiration from other languages. He could deploy a standard Mexican delay tactic and use the phrase al ratito (link in Spanish) literally “in a little while”, but technically an indefinite part of time which could be at any time in the future. Or Powell could tell the public that high inflation will stop rising at such a rapid rate ahorita (Spanish) – which might be now, later, or never – the ultimate vague answer.
Daniel Hole, director of the Institute for German Studies and Linguistics at the University of Stuttgart, suggested vorübergehend, which literally means “to overtake” in German. “It suggests brevity in a lot of cases, but it doesn’t strictly imply it,” Hole said. Prices, Powell might say, are probably nur vorübergehend rising; they will eventually come down.
Another German word, the evocative zwischenzeitigconnotes a “meanwhile,” said Henrike Lähnemann, professor of medieval German literature and linguistics at the University of Oxford. Like an interregnum, zwischenzeitig involves a phase between more stable periods. The United States has experienced years of inflation below 1% and will return to a rate close to 2%, a Fed statement could point out, adding that prices are only experiencing a zwischenzeitigen rise.
Lähnemann came up with another sentence, I am Schwebezustand, meaning “in a state of suspense”. When it comes to waiting for prices to drop – or even for the pandemic to end, or for supply chain issues to resolve themselves – Americans are certainly im Schwebezustand. Just like Powell, surely, by wanting to stop talking about inflationary pressures at all.