Since core services are the most stubborn component of inflation, it's worth keeping an eye on. Here's the 3-month rolling average:
After nine quarters at about 5%, core services inflation finally fell to 3.5% in Q2 but then stayed there in Q3. Stay tuned for Q4.
Pretty impressive that no matter what, no matter when, you stay on "Team Temporary." My retirement account wishes you'd been right!
The critical thing is not how "temporary" the inflation was, it was whether the Fed had any chance of controlling the inflation. It did not - inflation came down before Fed raises could have had in effect, and obvious it did not kill inflation by increasing unemployment, which is its standard dogma.
The Fed probably did more damage to your retirement account with its raises than inflation did. Rate raises reduce both stock and bond prices. Those prices should eventually come back up, but maybe too late for you if you are retiring soon.
Is it your proposition that the Fed rate hikes have had no effect on inflation at all? Or just that they can't take credit for the entirety of inflation coming down?
I surely agree with the second statement, but if you are proposing that interest rate levels have no effect on people's spending behavior (and therefore on prices), you're going to have to do more work than simply asserting it.
And if you're not proposing that - if you agree that rate hikes impact prices - then I'd ask you to consider the counterfactual where the Fed kept rates low. Whither inflation in that scenario?
This is an odd comment. It flips reality on its head. Inflation surged after the reopening and it surged in many places all over the world. It jumped again when Ukraine was invaded.
Team temporary said these were mostly supply related issues that would work themselves out, there would be no inflation price spiral and the Fed would not need to kill the economy and employment to get inflation down.
Team temporary has been exactly right....and yet we have many people (Matt isnt alone) who take these facts that confirm the initial analysis of Team temporary and insist that it is actually proof that Team Temporary was wrong.
I suspect the charts and official values would be much more impactful if Housing costs were accurately captured in the inflation stats. If so, we would see a more accurate picture showing higher initial inflation spike in 2021/2022 and a more rapid and consistent fall in 2022/2023. But perhaps not...the charts and values already support Team Temporary's narrative.
This shows that services were not a major driving factor of the inflation. Inflation of other things, such as oil and gas prices and the PPI, were at much higher rates than headline inflation.