On the May FOMC

The FOMC has declared “mission accomplished” on inflation, and removed language that it is “monitoring inflation developments closely.” This is despite the fact that Monday’s report of 1.9% year-over-year core PCE inflation is the result of anomalously soft year-ago data dropping out, and anomalously hot January data staying in. Adjusted for these anomalies, year-over-year core inflation is actually only 1.7%. The FOMC admitted as much in the minutes of the March meeting, but ignored it today – casting further doubts on the intellectual depth of the Powell regime. Seemingly hawkish language from March about how the “outlook has strengthened” is gone. But on the other side, an exaggerated claim about business investment growth was added. Markets don’t seem to care much about any of it, perhaps because they are coming to understand that the Powell Fed’s communications are not sophisticated enough to deserve the usual exegesis.