Run, Runaway! February PCE Core Deflator YoY Rises To 5.4%, Highest Since 1983, As Fed Keeps Foot On Monetary Gas Pedal (Spread Between PCE Core Deflator And Fed Funds Target Rate Highest Since 1970)

Confounded Interest ^ | 03/31/2022 | Anthony B. Sanders

[Browns Ultra Fan]

Run, runaway!

February’s Core Personal Consumption Expenditures (PCE) price YoY grew to 5.4%, the highest since 1983. The spread between the PCE Core Deflator and The Fed Funds Target Rate (upper bound)

In terms of the spread, it is the highest since the 1970s.

The Taylor Rule (which Jerome Powell probably thinks is the New Jersey breakfast meat “Taylor Ham”) indicates that The Fed’s target rate should be 12.21%. This is using the Rudebusch specification of the Taylor Rule.

Now that the Biden Administration is going gangbusters on building electric cars, lithium prices are going through the roof.

The Federal Reserve’s new theme song is “Come Feel The Inflation!”

Noddy Powell?

[Browns Ultra Fan]

Fed keeps foot on monetary gas pedal killing the middle class and lower income households.

[tsomer]

Could somebody translate this for us knuckle Heads?
Maybe there’s a dictionary somewhere online? I have no idea what they’re talking about, but the big, san-serif letters in the title indicate that it’s really important.

[Tell It Right]

The Fed's original mandate (what the Federal Reserve Act created the Federal Reserve for) is to keep up from experiencing runaway inflation. (Later another act says the Fed is also supposed to keep unemployment rates low too, which is a kind of balancing act because the measures to reduce unemployment often increase inflation and vice-versa.)

The Taylor Rule is not a law or regulation, but a long-held belief of how to calculate what the Federal Reserve should set interest rates to in order to have a healthy economy that doesn't overheat it (make inflation go sky high). The variables that go into calculating the Taylor Rule are saying the Fed's interest rates should be 12%. Anything lower than that right now (it's currently 0.5%) is causing crazy inflation (duh, that's what we're experiencing).

[citizen]

PCE Core Deflator is....what?

[citizen]

A FED rate of 12% sounds like back to the Volker days.
And...if inflation was calculated as it was back then, we’d have a rate like in the Carter days.

[Erik Latranyi]

It means inflationary pressures are increasing instead of decreasing.

[VTenigma]

I can’t believe $6 trillion in helicopter money could fuel inflation. /s, no I’m not related to Nancy Pelosi.

[Tell It Right]

Agreed. The Taylor Rule is meant to prevent Carter days inflation (or for that matter Great Depression type inflation, which the Fed failed to do even though that was their only job at the time).

The reason it ought to be 12% now is because we've been money printing like crazy since 2008, both in low rates and in QE (quantitative easing). And that's just the Federal Reserve --Congress' spending binge also jacks up inflation. Basically, if other variables go hay-wire and all that's left is adjusting the interest rate, then the interest rate has to go way up to compensate.

In order for the interest rate to be a lot lower than 12% without having runaway inflation, we have to get the Federal Reserve to slack off QE (which they're doing now, it's called "tapering" in Fed-speak) and to convince Congress to quit spending like my ex with credit cards.

[Leaning Right]

> we’ve been money printing like crazy since 2008, both in low rates and in QE (quantitative easing). And that’s just the Federal Reserve —Congress’ spending binge also jacks up inflation <

Yep. But that’s not what a radio talk show host in my city said this morning. (He calls himself an independent, by the way.) He said that this inflation is entirely due to greedy corporations. And caller after caller agreed with him.

I live in a heavily Democrat area. So I’m not surprised by that. But I’m certainly disgusted.

[GBA]

Hey, what’s the problem? He’s just finishing the work that obama and he had started, but then that bad orange man Trump put a stop to it all almost single handedly.

So, c’mon, man, isn’t this exactly what all of those 81 million or so voted for?

They wanted this and now we got it! Let’s all bend over and rejoice!

[Tell It Right]

Biden calls himself a moderate. LOL

[griswold3]

Steve Liesman (CNBC) said it was ‘good but we have a long way to go.’ But maybe he didn’t get his talking points yet. So...

[griswold3]

And just last month they referred to the Taylor Rule to be 7%. Harrumph.

[citizen]

Convince Congress to curtail spending?? Bah, I realize more than ever that these pols look no farther than the next election and the votes they can buy via pork barrel spending and feel-good legislation, also usually at a hefty price.

As for the FED, people keep saying it is necessary - and perhaps this is true, given the runaway spending of Congress. But, really, don’t the FED & Congress reinforce the Keynesian tendencies of each other?

[Tell It Right]

"But, really, don’t the FED & Congress reinforce the Keynesian tendencies of each other?"

Yes. And I dare say they're beyond Keynesian. If I'm not mistaken, even John Maynard Keynes had limits on his spend-to-prosper mentality. I'd dare say his spending methodology would be to the right of today's "conservatives".

[citizen]

Original Keynesian philosophy, iirc, was based on stimulating economic activity by freely spending the existing wealth of the realm, not by borrowing and spending.

[tsomer]

"Steve Liesman (CNBC) said it was ‘good but we have a long way to go.’ "

He didn't say whether that "long way to go" was in the vertical or horizontal direction?

[tsomer]

Thanks for that explanation, it hit the spot!

I wonder if they’re planning to invoke that Taylor rule once the peons have exhausted their nest eggs or moved their savings elsewhere? Then they can bleed people over loans and mortgages.

[Tell It Right]

I personally think they’re raising rates and slacking QE enough to tank the stock market and economy enough to keep Biden from being re-elected. I don’t think they want Trump in. But there seems to be a coordinated effort by organizations that are normally pro-Dim to change the narrative to make Brandon look bad. (Look at the drive by media outlets now talking about Hunter Biden’s laptop being a real story.) I think they’re trying to damage Brandon enough to make him not run for re-election so someone “new” and “different” can replace him -— like Kamala. (I know, she’s his VP, but that’s how they’ll sell it.)

[citizen]

...they’re trying to damage Brandon enough to...

---

Make him resign, to 25th Amendment him or otherwise get him out of the way. Otoh, Harris may be even less popular than FJ Brandon. If they want her in, I should think even worse things are planned for the world than the current trends. Worse than Hillary! if you can imagine that.