I do not get it. I do not understand why there is any talk of raising rates at all. Inflation isn’t just low, it’s freakishly low.
Look at this chart, which goes back nearly 70 years:
This chart goes back to January of 1947. The chart covers 68 1/2 years of U.S. inflation.
Where are we relative to the last 70 years? Inflation as measured by CPI has only been lower 4 times. Once quite recently, after the crisis, and the data says we are diving again.
Some people say core inflation is accelerating. This is crazy, but lets see what they say:
“This leaves the Fed with less scope to delay raising rates until it sees more evidence of a rebound in real activity,” said Paul Ashworth, chief economist at Capital Economics in Toronto.
“September is still the most likely (rate) lift-off date, but July is not out of the question, particularly not if we get another couple of robust rises in core consumer prices in May and June,” he said.”
Honestly, this is crazy talk. We should be saying to this person “You are talking crazy talk” , and not quoting them in an CNBC article. Less scope to delay raising rates? Robust rises in core consumer prices? These sentences do not make any sense when confronted with the data.
We’ve had some months where we hit 0.6%! Did we see 7.2% inflation for the year? No.
How about that terrifying, multi-month “trend” in 2011? How did that pan out? It ended up being nothing at all.
There is simply not a credible, data driven case for hiking rates in September. Talking about raising rates is…crazy talk.