Core year-over-year CPI price growth, at 2.7%, is above the Fed's preferred 2% soft target for this measure that is roughly consistent with the 1%-2% comfort zone for the core chain price index for personal consumption. And the headline year-over-year gain moved upward to 2.4% from 2.1%. The core year-over-year rate may drift down toward the 2.5% area through mid-year due to easier comparisons, but this may not suit a Fed that would probably like to see the figures "comfortably" and sustainably within the preferred range, and not just dancing at the upper end.
A few points:
1.) A central tenant of central bank thinking over the last 6-9 months is that a slowing economy would lead to lower inflation. That hasn't materialized yet. While oil prices are down, they certainly aren't deflationary yet. And agricultural prices are rising, indicating they may take oil's place as the inflation area of concern.
2.) All of the fed governors have publicly stated inflation is still too high. This implies we are nowhere near a rate cut even if the economy slows.
3.) We are nowhere near stagflation. While the overall inflation level is still a concern, it is hardly at out-of-control or runaway levels. However, the overall inflation level is still way too high to consider a rate cut.
2 comments:
But a rate hike will definitely kill the stock market.
this might be a reason why inflation is not under control ( and in fact may be gathering steam )
http://buttonwood1792.blogspot.com/2007/03/pushing-on-string-new-york-fed.html
Effectively, billions are being created out of thin air by the NY Fed operations which end up being added into the money supply over time. It's no wonder they eliminated reporting M3. This sudden currency creation, in my simple mind, would seem to be dollar negative and bad from an inflationary standpoint for everyone over time.
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