Core inflation was only up 1.8% vs. expectations of 1.7%. The fed has said they want core inflation to be >2%. We still aren’t there, so I don’t get the logic that’d lead to them increasing rates.
The whole thing is pretty funny. We spent how many years being paranoid about deflation and hoping for inflation. Now people think inflation under 2% is too much? If inflation dropped, then we’d be hearing about deflation fears.
Since 1992, inflation has been below 4%. We’ve had a pretty big range of interest rate policies since then. That tells me we’ve hit a point where moving rates doesn’t change inflation. Inflation must be dependent on other factors and technology has helped keep a lid on inflation. If wages increase too much, companies invest in automation to reduce workers and save money. That keeps inflation pretty flat.
So no more rate hikes?
Powell might have been wrong. It’s a good opportunity for him to pause and make decisions based on data. Interest move might be a little premature, but it’s still not too late if he pause in December or early 2019.
Isn’t that mean bear market and recession?
Mild inflation is always good because it means there is a demand for money.
No, it means we may avoid recession if they stop hiking rates. Usually economic expansion lasts until they hike rates enough to kill it.
Exactly. Once they stop hiking means they have killed it.
GDP is still growing…
Past or future?
this Quarter…
FED has “future” data. So if they stop hiking means recession soon. Not good, can’t stop hiking. Slow down is ok.
From what I understand, hiking was/is going on to preclude future runaway inflation, which(if it happens) will affect economy.
Anyways we will find out 