Yes, the inflation gauges have cooled considerably since the headline CPI peak of 9% in June 2022, but the Fed is not yet remotely out of the woods. In fact, if the inflation tide is viewed through the more stable and reliable lens of the 16% trimmed mean CPI, which peaked at a somewhat lower 7.2% level a few months later in 2022, the annualized rate of gain was still 4.12%% during the first four months of 2024.
So not only is the current inflation run rate barely halfway back to the sacrosanct 2.00% goal, but the larger point is that a 4.12% inflation rate is nothing to write home about under any circumstances. If sustained over just one decade, wages and savings booked in April 2024 would loose fully 35% of their purchasing power.
So, as much as the boys and girls on Wall Street insist on getting a new shot of easy money juice, the paint-by-the-numbers crowd in the Eccles Building is not nearly there yet. Not by a long shot.
Nor should they be. After all, why in the world are they even thinking about rate cuts when you have an inflation picture depicted by the chart below? To wit, the Y/Y rate of change as embodied in the purple line is not the whole story. In fact, what counts is the cumulative rise in the price level (black line) that occurs when the inflation readings are elevated month after month after month.
As we documented yesterday, the 40-year high inflation that has materialized in the last several years is the work of the Federal Reserve, egged on by the massive spending and borrowing of UniParty politicians led by Donald Trump during the stimmy bacchanalias of 2020, and then compounded when "Joe Biden" piled on with another gratuitous $2.2 trillion of free stuff in March 2021.
So as of April the cost of living is up by nearly 30% just since the day the Donald stumbled into the Oval Office. That's been devastating to the living standard of main street households, and makes a mockery of the Trumpite boast that the MAGA economy was a time of milk and honey, as well as the preposterous Biden claim that he has brought the inflation rate dramatically lower.
To the contrary, the Trump-Biden administrations shared the wind-up period when the worst inflation in four decades was gestated by the utterly irresponsible fiscal and monetary policies pushed by the Washington Uniparty.
After all, Trump cut taxes by $1.6 trillion in 2017 and didn't pay for the revenue loss---only to be followed with the massive green energy and infrastructure tax credit boondoggles under Biden. Likewise, an already hideously bloated defense budget is now nearly 50% or $300 billion higher than Obama's last budget, and for no reason except to prosecute more Forever Wars in Ukraine and the middle east.
