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Fed Rate Hikes Are Back in the Conversation After Hot Inflation Report

22 points by lamontcg 3y ago

lamontcg 3y ago
https://archive.is/j87ct https://archive.is/j87ct
- hcmacro 3y ago
  CPI ain't PCE my guy. Other than suggesting a firm January print, this print has not really changed forecasts for core PCE--the Fed's preferred target---to hit 2% yoy by May.
  - lamontcg 3y ago
    Core services inflation is up and the Fed doesn't just care about only one number, and I'm not your guy.
    - hcmacro 3y ago
      Nope, the Fed cares about PCE because that’s the inflation measure it targets over time. Consequently, core PCE and core PCE services ex-housing. CPI and PPI matter for policy setting to the extent that their components feed into PCE. But Core CPI Services-XH and Core PCE Serviced-XH have little overlap in their components. The Fed is concerned about the latter falling because real rates, in the model that the Fed uses, get tighter the longer rates remain on hold. Just look at the last quarterly SEP—it forecasts PCE not CPI.
      - lamontcg 3y ago
        Go argue with the Richmond Fed, then, and explain to them how the Fed never cares about anything other than the PCE number and services is meaningless: https://www.richmondfed.org/research/national_economy/macro_minute/2023/mm_01_10_23 https://www.richmondfed.org/research/national_economy/macro_...
UncleOxidant 3y ago
A hike seems unlikely, but it seems likely that rates are going to stay where they are for a while. I wouldn't be surprised if cuts come much later than the expected June timeframe.
j-j-j-j 3y ago
Higher rates require indebt government to borrow more money issuing more bonds. Higher bond issuance required FED to monetize them and increase money supply. Increased money supply increases inflation. Higher inflation forces FED to increase the rates. Get your popcorn ready (while you can still afford it).
StreetChief 3y ago
> Shelter prices and wage gains in a tight U.S. labor market are putting upward pressure on prices. Ah yes, the classic "wage gains are eating into our profits" inflation.
Clubber 3y ago
The projected 2024 interest owed on debt is $870 billion, which surpasses the military budget of $842 billion. https://www.pgpf.org/blog/2024/02/what-is-the-national-debt-costing-us https://www.pgpf.org/blog/2024/02/what-is-the-national-debt-... https://www.cbo.gov/publication/59511 https://www.cbo.gov/publication/59511

22 points by lamontcg 3y ago

lamontcg 3y ago

https://archive.is/j87ct https://archive.is/j87ct

hcmacro 3y ago
CPI ain't PCE my guy. Other than suggesting a firm January print, this print has not really changed forecasts for core PCE--the Fed's preferred target---to hit 2% yoy by May.
- lamontcg 3y ago
  Core services inflation is up and the Fed doesn't just care about only one number, and I'm not your guy.
  - hcmacro 3y ago
    Nope, the Fed cares about PCE because that’s the inflation measure it targets over time. Consequently, core PCE and core PCE services ex-housing. CPI and PPI matter for policy setting to the extent that their components feed into PCE. But Core CPI Services-XH and Core PCE Serviced-XH have little overlap in their components. The Fed is concerned about the latter falling because real rates, in the model that the Fed uses, get tighter the longer rates remain on hold. Just look at the last quarterly SEP—it forecasts PCE not CPI.
    - lamontcg 3y ago
      Go argue with the Richmond Fed, then, and explain to them how the Fed never cares about anything other than the PCE number and services is meaningless: https://www.richmondfed.org/research/national_economy/macro_minute/2023/mm_01_10_23 https://www.richmondfed.org/research/national_economy/macro_...

UncleOxidant 3y ago

A hike seems unlikely, but it seems likely that rates are going to stay where they are for a while. I wouldn't be surprised if cuts come much later than the expected June timeframe.

j-j-j-j 3y ago

Higher rates require indebt government to borrow more money issuing more bonds. Higher bond issuance required FED to monetize them and increase money supply. Increased money supply increases inflation. Higher inflation forces FED to increase the rates. Get your popcorn ready (while you can still afford it).

StreetChief 3y ago

> Shelter prices and wage gains in a tight U.S. labor market are putting upward pressure on prices. Ah yes, the classic "wage gains are eating into our profits" inflation.

Clubber 3y ago

The projected 2024 interest owed on debt is $870 billion, which surpasses the military budget of $842 billion. https://www.pgpf.org/blog/2024/02/what-is-the-national-debt-costing-us https://www.pgpf.org/blog/2024/02/what-is-the-national-debt-... https://www.cbo.gov/publication/59511 https://www.cbo.gov/publication/59511