A new monthly feature on page 2: tracking the Fed's "optimal control" of "transitory" inflation above the pre-pandemic trend and (hopefully) back down to it.
What you're not hearing about today's horrible CPI data
Thursday, June 10, 2021
From Powell's point of view, it's barely above trend -- hardly the "optimal control" he wants.
Update to Strategic View
As hot as the May CPI data looks, it's actually cooler than the prior month's. That's not what the Fed wants. May data is measured off the very bottom of the pandemic. From pre-pandemic year-ago trend, 4.9% year-on-year CPI is only 3.1%, but nevertheless above-trend in what appears to be "optimal control" designed to compensate for prior deflation. But the trend itself is below target from the Fed's point of view, so inflation has to run hotter and longer. Even if market-implied expectations go back to their post-GFC highs, they'd have to stay there until May 2024 for the Fed to achieve its target of average inflation at 2%.