Inflation just keeps dropping and dropping:
The headline rate in November for PCE inflation was substantially negative. The core rate, which the Fed tracks closely, was 0.7%, far below their 2% target.
Measured on a more conventional year-over-year basis, PCE headline inflation came in at 2.6% while core inflation was a bit higher at 3.2%. Both are going to come down mechanically over the next few months.
Not sure about market reactions over holidays--but indexes are falling...
Lower inflation: good news and the Fed will cut rates....
Lower inflation: but wait, firms are losing pricing advantage, so profits might be down....
Lower inflation: Good news for Biden, so stocks down?
Lower inflation: not at the grocery store....
The stock market is up today...
EDIT: I see your time stamp. Poor timing! The S&P 500 was in negative territory for about 20 minutes and you posted right in the middle.
I stand corrected....though it not up by much now (and Dow down a wee bit)
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Dangerously low inflation is bad news for Biden. American worry about what comes next! DANGER!!
Another sign that the Fed did the right thing the last couple of years.
If you buy a magic elixer that promises to extend your life, it would be a mistake to assume that every day you wake up is another sign that the magic elixer is working.
This is true for supplements, protein mixes, remedy pills and many other items.
Hard to disprove the true believer without an alternate reality to compare against. But its easy to point out the lack of true
signs.
What you say is correct. It is too soon yet to judge the Fed's actions.
But many (including our Blog Host) predicted the Fed would cause a recession by now, and that hasn't happened. So that's at least something.
I would argue that today's economic news (and the recent economic news more broadly) is *consistent* with the hypothesis that the Fed did the right thing the last couple of years, even though it certainly doesn't *prove* it.
Lol, well yes. If we blindly assume that the Feds actions will bring certain results, then when those results occur we can toast the success of the Feds actions!
This is just like the magic elixer.
Its important to remember that the Fed and other economic 'experts' have a very, very poor track record of estimating future growth and inflation. Their inability to predict what will happen when they turn the knobs and pull the levers should give us pause in celebrating their turns and pulls when a recession is avoided.
An equivalent case can be made that recent economic news is consistent with the hypothesis that the Fed acted unnecessarily and has harmed the economy, capital investment and long term growth for no good reason.