The Core! Core PCE Deflator Declines To 4.4% YoY As M2 Money Stops Spinning At -1.3% YoY (Taylor Rule Estimate Now 10.0%)

Confounded Interest ^ | 01/27/2023 | Anthony B. Sanders

[Kaiser8408a]

There was a hilarious film with Hillary Swank and Aaron Ekhart called “The Core” where earth’s core stops spinning and the earth gets cooked by the Sun’s rediation. Now we learn that the Earth’s inne core has actually stop spinning. This time, however, all that has happened is that Joe Biden is President which is almost as bad,

But also related to “The Core” is that the important Personal Consumption Expenditures (PCE) are out for December along with PCE price deflator numbers. In short, personal income was up 0.2% month-over-month (MoM) in December while personal spending was down -0.2%. REAL personal spending was down -0.3% MoM.

But the all important PCE deflators numbers were down all well. The REAL PCE price index (or deflator) was down to 5.0% YoY in Decmember while REAL CORE price index was down to 4.40%. All this is happening as M2 Money growth has stop spinning (down to -1.3% YoY in December).

Based on a CORE PCE YoY of 4.40%, the Taylor Rules suggest that The Fed Fund Target rate should be … 10%. However, the current Fed Funds Target rate is only 4.50%, so The Fed is not even half way there.

Fed Funds Futures are pointing to a peak rate of 4.90% by the June ’23 FOMC meeting, then a pivot (despite denials from Fed talking heads).

Of course, The Fed doesn’t follow the Taylor Rule or any other transparent rule for rate management. Rather, Fed Chair Powell like former Chair (and current Treasury Secretary Janet Yellen) follow a more seat-of-the-pants approach.

[Kaiser8408a]

The US economic core has stopped spinning thanks to Biden, Pelosi and Schumer and the cast of crazies running Washington DC.

[Red Badger]

[rigelkentaurus]

Interest rates are still highly negative (easy) in real terms. Government policies are intentionally the cause of the inflation and product shortages. This is all by design and the result will be, largely, the elimination of the middle class. If the economy cannot live with positive interest, then there are massive structural problems. If those are not addressed, at some point, the system will collapse uncontrollably. Laws of economics can only be ignored for so long.

[Raycpa]

I’m not convinced the fed rate can have direct impact on inflation.

[dynoman]

Because Fed rate changes do not address the root cause problem!