Inflation Update . . . Core PCE Inflation (the Fed's favorite inflation measure) remains at a 40-year high

Here’s a look at grocery prices:

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What’s the likelihood that the Fed reaches its 2% target?

We really don’t know.

We have never had this much “helicopter money” left sitting around,
never even close,
never even remotely close.

Typically as helicopter money is spent on consumer goods, the increase in demand drives up prices and that is exactly precisely how we measure inflation.

But some of it gets spent on stock, bonds, monkey jpegs, and production facilities for consumer goods. (That last category partially offsets the measured-inflation.)
Economics (specifically econometrics) is very good at measuring smaller numbers. HYPOTHETITICAL EXAMPLE: “A 1% increase in the money supply will result in a 1.5% increase in demand for gasoline and other goods, creating a 2% increase in inflation.”

But the amount of money sitting around from the pandemic splurge is HUGE. It’s off the charts, and we simply do not have models that have been tested at such extreme levels.

US 3-month annualized core CPI +4.5%



Today’s PPI report was high:

Does this fit in here, and if so, how much of a factor is it?

Shelter is about 1/3 of the CPI “basket” and rents is a big chunk of that (also a third I think) so, yes. Rent is a big part of inflation.
So far post pandemic rents have not kept pace with home prices.
Basically any landlord who bought in recent years probably got a raw deal and would have been better off renting the house commercially and then subletting it.

In recent years, “I’ll be the master tenant, I’ll pay the rent, I’ll take the risk of bad tenants. I’ll do the repairs I just don’t want to own the house because houses are over-priced” would have been a much better deal than buying.

Here’s more on this: