More Hot Inflation Data Can't Be Making The Fed Happy

The Fed's favorite inflation gauge is Personal Consumption Expenditures (PCE) data.

Back in Spring-Summer 2007, the Fed couldn't say enough about how promoting price stability (fighting inflation) and maintaining the FOMC's credibility as inflation fighters was Job One. Now, 9 months later, headline PCE has risen to 3.7% year-over-year (YOY) from just 2.1% YOY back in July 2007. Meanwhile, core PCE (less food and energy) has risen to 2.2% YOY from 1.9% back in September. This is higher than the Fed's stated comfort zone for the core rate. Moreover, the Fed has openly acknowledged that consistently high headline inflation data, which we have now, will eventually show up in the core - which should eventually push that 2.2% YOY rate ever higher.

So, bottom line, as much as the Fed is seemingly diverting our attention away from inflationary pressures as it desperately tries to keep the economy vertical via printing money , the inflation monster is alive and well - and is growing and gaining momentum. It's only a matter of time until the Fed will be forced to live up to its own rhetoric, and deal with the monster that it has created.

Tick, tick, tick...