Is the Fed almost done tightening yet?
Not it they were telling the truth when they said 2% is the inflation target.
Of course it’s the Fed and they can renege anytime they want.
Chart below shows the 2% target and the overall CPI (light blue).
Since shelter is 34.4% of CPI (Dec 2022), there are only two ways the Fed can achieve its stated goal
1.) Hold firm, until the purple and dark-blue lines (the two measures of shelter inflation) come way down to 2% and stay there, or
2.) Hold firm, until everything-else-inflation, food, healthcare, electric bills, insurance, college tuition, Netflix subscriptions, automobiles, and meals at McDonald’s, falls substantially below the 2% mark.
Bottom line:
If the Fed cuts rates now or in the near future, it will not achieve its stated goal.
