Here are the monthly inflation updates. It will be interesting to see if the Fed treats 2% as a symmetrical target or a ceiling. There might be an argument for treating it as a ceiling at this point in the business cycle, because employment is so strong. But employment is a lagging indicator. At this point, I think the Fed has reduced the potential of worst case scenarios, but I don't think they will loosen up monetary policy aggressively enough to avoid a bit of a contraction. And the depth of the contraction mostly depends on future decisions.
In addition to the problem that these measures are backward looking, of course, there is the issue, which is always the focus of these posts, that the shelter component is not particularly related to monetary policy, since it mostly measures the estimated rental value of owned homes, and even in the case of rented homes, frequently is measuring the growth in economic rents from the ownership of a politically protected asset, which is really more of a political transfer of wealth than an effect of monetary policy.
All of these questions about monetary policy discretion would be unnecessary under an NGDP futures targeting regime. Hopefully, we can continue moving in that direction.
The last couple of months have seen an upward movement in non-shelter core inflation. This puts core CPI at 2.36% and non-shelter core CPI at 1.68%.
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