A Question for the Fed

May 25, 2021

It’s not a surprise. Inflation is running hot. But, is it transitory and temporary, or is it real and here for the longer term. How hot will the Federal Reserve let it run, and for how long? When does transitory and cyclical become “secular” and “serious”? These are important questions and only the Fed has the answers.

In April, the consumer price index was up 4.2% from a year ago; producer prices were up 6.2%. The “core” measures for each of these indexes are running at 3.0% and 4.6%, respectively. The Federal Reserve focuses on the inflation measure for personal consumption expenditures (PCE), which should be up about 3.4% versus a year ago once we get the April data, which is scheduled to arrive this Friday…

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