Final CPI Prep: The Fed needs you to get fired
The Fed is lucky so far, not good.
TL; DR
The Fed is lucky so far, not good.
FED’S INFLATION FIGHTING PLAN
Post the ”transitory” inflation debacle which was based mostly on poor rigid textbook interpretations and flaccid applications of monetary principles, the Fed decided to man up and get tough on inflation.
Their plan—spelled out by Zoltan Pozsar in May 2022— consisted of getting inflation back to acceptable levels. Simple enough. They also handicapped where they would be successful in reducing inflation and where they thought they’d have problems. The Fed predicted what they felt they could control easily, and what they could not.
GOODS AND SERVICES INFLATION
The Fed thought they’d have more success in getting services costs down due to its domestic origins, and less success in getting goods inflation down due to supply-chain issues. But that is simply not true as summarized below.
Continues below forecast…