Like any good compass, the Fed´s inflation compass always points north!

In this Bloomberg Business piece, aptly titled “Everything Except Headline Inflation Is Saying the Same Thing About Inflation”, we read:

There are dozens upon dozens of ways to measure inflation, which at times means that monetary policymakers might be receiving conflicting signals on how much upward or downward pressure on prices there really is.

But after October’s Consumer Price Index report, most gauges of prices are all pointing toward the same thing: inflationary pressures that are far more consistent with an economy that’s on the verge of a tightening cycle than one slated to enter a deflationary spiral.


“There is not a lot here to be very happy about if you want the Fed to stay on hold,”wrote Michael Ashton, managing principal at Enduring Investments. “The only argument that is stronger now is that they are even further behind the curve.

Which closely mimics Richmond Fed president Jeffrey Lacker, quoted in this other Bloomberg Business piece:

Richmond Fed President Jeffrey Lacker, who votes this year and dissented in September and October in favor of a rate rise, told CNBC in an interview that strong growth in consumer spending showed the economy needed higher real interest rates.

There’s a chance we’re going to get behind the curve” if the Fed delays liftoff, he said.

The first piece above shows a version of this chart to indicate the ominous presence of inflation.

Fed Compass_1

But, lo and behold, in early 2008, if BB wrote something, it could have exactly the same title: Everything Except Headline Inflation Is Saying the Same Thing About Inflation”, only with the meaning reversed.

The correspondent chart:

Fed Compass_2

Common to the two periods is the fact that monetary policy was being tightened as gauged by nominal spending (NGDP) growth.

So, no matter the fundamentals, to tighten is the Fed´s default option. It doesn´t matter if oil prices are on a roll or on a chute!

Fed Compass_3