The October CPI data released on November 10 were greeted enthusiastically by financial market participants. Not only were the headline and core price increases the smallest in months, but both measures came in well below expectations. Does this mean that the back of consumer price inflation has finally been broken and that the Fed can … Continue reading Inflation in the Rear View Mirror?
Recent data on the labor market, including the October monthly employment report and weekly initial claims for unemployment insurance, indicate that excess demand for labor persists. The extremely tight labor market was an underlying theme of Fed Chair Powell’s press conference on November 2. The chart below shows the excess of job openings over the … Continue reading The Hot Labor Market and Outlook for Fed Policy
The Consumer Price Index (CPI) for September all but guaranteed that the Fed on November 2 will hike the federal funds rate another 75 basis points to 3-3/4 to 4 percent from its current 3 to 3-1/4 percent. As shown in the chart below, headline inflation—the blue line—stayed above 8 percent in September while core … Continue reading Is the Pace of Fed Tightening Slowing Soon?
Recent news confirms that the Fed’s job of tightening monetary policy has a ways to go. The September employment report conveyed an ongoing tight labor market and the reluctance of idled workers to return to the labor force—with implications for a continuation of inflationary pressure coming from this market. The most recent report on job … Continue reading Fed Policy: Getting Closer
The CPI data for August was not greeted warmly by financial markets, even though there was another drop in headline inflation (measured on a twelve-month basis, the blue line in the chart below). What unnerved market participants was the upturn in core inflation (that removes volatile food and energy prices) after several months of decline … Continue reading What Do the August CPI Data Tell Us About the Outlook for Inflation and Fed Policy?
On August 26, Fed Chair Powell sent a jolt through financial markets with his remarks delivered to the Federal Reserve Bank of Kansas City’s annual central banking conference in Jackson Hole, Wyoming. What did he say and why did he say it—and is there anything more to be said? The Powell speech was focused on … Continue reading Chair Powell’s Remarks: What Did He Say—and Why?
The more than doubling of IRS staff under the “Inflation Reduction Act” has caused a firestorm over who will be the focus (“targets”) of more tax audits and whether tax audits will be used for political purposes (“weaponization” of the IRS). This controversy raises the question of whether the current U.S. income tax system needs … Continue reading Rethinking the Income Tax
Headline inflation (that is, increases in the prices of all goods and services that consumers buy) has begun to slow. In July, the Consumer Price Index (CPI) showed no change from June in the average price that consumers pay for goods and services. Flatness in headline prices owed to a 4.6 percent decline in energy prices that … Continue reading Will Slower Inflation Lead to a Slowdown in Fed Tightening?
Worries about a looming recession have been ebbing and flowing over recent weeks. Real gross domestic product (GDP) contracted 1-1/2 percent at an annual rate in the first quarter of this year, and estimates for the second quarter suggest another decline. One widely followed estimate comes from the Federal Reserve Bank of Atlanta and utilizes … Continue reading The Coming Recession
On June 15, the Fed stepped up its anti-inflation effort, raising the target for the federal funds by 75 basis points for the first time in nearly three decades. Larger than expected increases in consumer prices and higher expectations of inflation by consumers were given as reasons for the unusual policy action by the Fed. … Continue reading What’s Ahead for the Fed’s Inflation Fight?