The Federal Reserve is using the wrong models and structural thinking to assess inflation and that's leading the central bank to misunderstand what's causing it, CNBC senior contributor Larry Kudlow said Tuesday.
"They do not understand the monetary causes, the exchange rate causes nor the need to look at forward-looking market indicators, such as commodities. … They don't get that," he said in an interview with CNBC's "Power Lunch."
"I don't think they have the power to move the inflation rate one way or another," he added.
Fed Chair Janet Yellen said Tuesday that the Fed may have overstated the strength of the labor market and the rate of inflation. That may lead to monetary policy ahead that will be easier than previously thought.