Fed Blinks

The beatings have paused

No rate hike this month, for the fist time since March of last year.

In a totally not-coincidental note, inflation has fallen by half over last year's peak. (You can be sure that the Fed had the most recent numbers before they were released to the general opublic)

Go figure:

Federal Reserve officials agreed to hold interest rates steady after 10 consecutive increases but signaled they were prepared to raise rates next month if the economy and inflation don’t cool more.

New economic projections, released Wednesday after their two-day policy meeting, strongly suggested officials were leaning toward slowing down their increases rather than stopping them altogether. Most of them penciled in two more rate increases this year, which would lift them to a 22-year high, and boosted their expectations for growth and inflation.

………

After holding the fed-funds rate near zero following the Covid-19 pandemic, the Fed had raised the rate at every meeting since March 2022 by a cumulative 5 percentage points, the most rapid series of increases since the 1980s. Officials slowed their increases this year, lifting the rate by a quarter percentage point at their past three meetings, most recently in May. 

CPI, year over year


CPI, Month to Month

And inflation continues to drop, but it's still not hit their 2% target, so the rate hikes will continue:

Inflation fell in May to around half last year’s peak but remained elevated, showing Federal Reserve officials made progress in cooling price pressures but could have more work to do.

The consumer-price index rose 4% last month from a year earlier, the Labor Department said Tuesday, well below the recent peak of 9.1% last June and down from April’s 4.9% increase.

………

So-called core consumer prices, which exclude volatile food and energy categories, climbed 5.3% in May from a year earlier, down from 5.5% in April. Economists see core prices as a better predictor of future inflation.

………

Core prices remain elevated in part because an earlier surge in housing-rental prices continues to show up in the inflation figures. Apartment-rent growth has since cooled significantly—declining to just under 2% over the 12 months ended in May from double-digit increases a year ago. Those price changes will take pressure off inflation, but they take time to show up in inflation data due to the lag in how rent is calculated. 

You know, cracking down on private equity in real estate, actually cracking down on private equity everywhere, would help the economy a lot.

I'm also of the opinion that the rate increases have not done as much to lower inflation as the Federal Reserve would want us to believe.

Then again, what do I know, I'm an engineer, not an economist, dammit!*

^*I love it when I get to go all Dr. McCoy!