The Fed´s favorite bedtime story: “It´s temporary”

The charts illustrate the “story”.

Bedtime Story_1

Bedtime Story_2

Bedtime Story_3

There are some points of interest:

  1. Since formally becoming an IT central bank, the “target” has never been attained!
  2. For most of this time, oil prices were stable, so the fall in all measures of inflation was not the result of falling oil prices!
  3. The more recent crash in oil prices will “temporarily” reduce inflation even more. When that effect disappears, inflation will go up but still remain far short of target!

Bottom Line: It´s very unlikely that the Fed will begin the “policy normalization” process this year!


One thought on “The Fed´s favorite bedtime story: “It´s temporary”

  1. Rising commodity prices are a reason for inflation-monomania-hysteria (2008).
    Five years of falling commodity prices, and even plunging oil prices and deflation in unit labor costs is…well, temporary.
    No wonder Treasury bonds pay so little interest…one more recession and the US does a Japan…

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