So when's the first rate hike?
It was in July 1996, per the FOMC Meeting Transcript, that the U.S. history of 2% inflation target was born:
It was in July 1996, per the FOMC Meeting Transcript, that the U.S. history of 2% inflation target was born:
MS. YELLEN. Mr. Chairman, will you define "price stability" for me?
CHAIRMAN GREENSPAN. Price stability is that state in which expected changes in the general price level do not effectively alter business or household decisions.
MS. YELLEN. Could you please put a number on that? [Laughter]
CHAIRMAN GREENSPAN. I would say the number is zero, if inflation is properly measured.
This exchange was part of a long Yellen exchange, in which Yellen argued for some positive inflation under the "greasing-the-wheels argument".
Anyway, the point is, I don't think we're at a point that would meet Greenspan's general, non-numerical criteria, which would be a place where people generally don't think about inflation when making decisions.
If, and it's a big if, the Fed is able to do it's job of overseeing the financial system (again, it's a big "if"), then I'll be all-in on rate cuts the day the next CPI, PPI or PCE report isn't made into a national spectacle. That's the day I will feel confident we have achieved price stability and that rates are risking being restrictive.
In case you forgot why inflation is harmful, Irving Fisher can remind you here.
Bad day for stocks and bonds yesterday. Fixed income doesn't like inflation and yields finished the day up 15-20bps with the 2Y at 4.66% and the 10Y at 4.33%.
XTOD: Ok, there’s a lot of bullshit making the rounds. Ex this, ex that, not so bad, blabla…
This is a terrible print for the Fed. There’s no sugar coating it. They will need to react to it one way or another. Supercore (that’s core services ex housing) is up a fucking 85 bp m/m. That’s what Fed likes to watch. That’s the largest monthly jump since April 22. Shelter accelerated. Medical care, recreation and tuition all ripped. First foregone conclusion: cuts need to be pushed back. For now it’s June for the 1st full cut. Might still be a bit too ambitious. Second conclusion: now just above 90 bp of cuts FY 24, also way above the Fed guided 75 bp, which is starting to look a bit too optimistic. Someone check on Claudia Sahm
XTOD: Core CPI comes in hotter than expected, 0.4% in the month of January--which is a 4.8% annual rate. I'm not a big fan of second derivative forecasting but those of you who are should be worried. Annual rates: 12 months: 3.9% 6 months: 3.6% 3 months: 4.0% 1 month: 4.8%
XTOD: Now is the part where we shift from "See, it was transitory all along!" back to "This is really holding us back, we need to raise the target." Get ready to start hearing it again, because it's coming!
XTOD: Inflation - it's like trying to lose 20lbs. The first 10 come off like butter. The last ten are a root canal.
XTOD: Because the proper benchmarks for volatility laundered returns are only other volatility laundered returns.
XTOD: I've become convinced that if Biden is going to actually run for president in an electorate where 90% of independents are worried about his age, he should say fuck it and talk about his age *constantly* but only in the context of Trump being 4 yrs younger and 4x crazier
https://x.com/INArteCarloDoss/status/1757435331115196573?s=20
https://x.com/jasonfurman/status/1757402309548552694?s=20
https://x.com/Jesse_Livermore/status/1757460690397274401?s=20
https://x.com/Convertbond/status/1757401071117369846?s=20
https://x.com/CliffordAsness/status/1757378120607318032?s=20
https://x.com/DKThomp/status/1757425586585133523?s=20
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