When will the Fed run out of patience?

They have extended their “patience horizon” until next year.

From Bill Dudley:

“People think about inflation typically on a year-over-year basis, and those year-over-year measures are going to be depressed for a while,” Dudley said. “But thinking about it sequentially, we would expect the inflation data to show a little bit more upward pressure than what we’ve seen over the last four months or so.”

“Thinking about it sequentially”, means on a monthly-annualized basis. If you do that, however, all you get is a big headache from looking at numbers jumping up and down and most of the time showing no discernible trend.

A “Price Pressure Measure” from the St Louis Fed shows that after rising to 20% following the election (and the “Trump Bounce”), the probability that Headline PCE inflation over the next 12 months will exceed the target has dropped to close to 5%.

The Fed, at least some of the FOMC participants, to everyone´s chagrin, does not give up on the unemployment inflation link.


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