Friday, October 13, 2017

September 2017 CPI

We continue in a holding pattern.  YOY core inflation is about 1.7%, core inflation ex. shelter remains about 0.6%.  Shelter inflation continues to remain above 3%.  There hasn't been a single month of core ex. shelter inflation above 0.1% since February.

Mortgage growth and bank lending seems to be growing at a rate of 2-3%.  I suppose things could just keep moving ahead indefinitely like this.  But, I think the obsession with asset prices and the tendency toward viewing asset prices as a reason for tighter monetary policy will prevent us from easing when random economic shifts cause a downshift in these patterns when there is no buffer for a downshift.

3 comments:

  1. Per usual, excellent post.

    "But, I think the obsession with asset prices and the tendency toward viewing asset prices as a reason for tighter monetary policy will prevent us from easing when random economic shifts cause a downshift in these patterns when there is no buffer for a downshift."--KE

    Actually, as I read Fed minutes and Beige Books, the obsession is with "tight labor" markets, and any possible hint that inflation might get a boost from rising compensation costs.

    The asset prices is another concern, but they seem okay with equities prices. The housing markets could be the trap. The Fed will respond to tighter housing markets with higher interest rates.

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  2. Courtesy note: I mention you in my latest NGDP post.

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