“The [inflation gauge] that the Fed uses makes no sense whatsoever, and it’s totally disconnected from market conditions,” Harvey told MarketWatch in a phone interview. Boston Federal Reserve President Susan Collins said on Friday that the U.S. central bank might not be done raising interest rates and that they are likely to stay “higher, and for longer, than previous projections had suggested.”
The Fed’s measures of inflation are heavily weighted toward shelter costs, which reflect the rising price of rental and owner-occupied housing. For example, shelter inflation has been running at 7.3% over the past 12 months, and also as of the most recent consumer-price index, for August. Shelter represents around 40% of the core CPI reading. Harvey says that’s a problem because shelter inflation’s retreat loosely follows the broader trend lower for headline inflation but at a lag, and the Fed wouldn’t be properly accounting for that lag if it decided to keep its target interest rates restrictively high.
Separately, MarketWatch’s economics reporter, Jeff Bartash, notes that the CPI also fails to capture the millions of Americans who locked in low mortgage rates before or during the pandemic and who are now paying less for housing than they had previously.
“The Fed is … using inflation, in what I call a false narrative,” Harvey said.
I wish had a nickel for every economist with a differing opinion on the state of the economy. Those fucking guys may as well roll bones or read tea leaves.
KarmaVarmint wrote: ↑September 24th, 2023, 9:57 am
I wish had a nickel for every economist with a differing opinion on the state of the economy. Those fucking guys may as well roll bones or read tea leaves.
KarmaVarmint wrote: ↑September 24th, 2023, 9:57 am
I wish had a nickel for every economist with a differing opinion on the state of the economy. Those fucking guys may as well roll bones or read tea leaves.
Most, if you listen to them and they are serious do not give definitive answers. Every economic decision creates a consequence. It is one of the reasons that economics is referred to as the dismal science.
The Fed and the government use a lot of measures that are stochastic that the stupid can understand. The problem is, most economic issues are way more complex than that.
SEE: Nero shifting his pants over rudimentary measured like GDP
