I was interested in Powell saying that rate rises had been paused recently and started looking at Federal Funds Effective Rate going back to 2000. Each time there has been a pause rates have then been dropped quickly. Have a look at this chart (you may need to reset the dates)
Given the amount of bad news around now is the Fed. on the verge of another pivot? If so, you can forget about solving inflation.
That’s the trouble with a fiat system - damned if you print money and damned if you don’t 
You get far more GDP growth printing money than you get inflation.
Milder inflation is good for smaller businesses as their utility bill inflation does not keep up year after year with their in store item inflation. In other words they profit more with mild inflation.
You are measuring 100 years of inflation is if it was last Tuesday.
Inflation has been low (around 2%) since the 1980s. The several times that the Fed raised rates, paused and then rapidly lowered rates had the context of low inflation and a slowing economy.
Fed Chair Powell recognizes that the current situation resembles the high-inflation 1970s more. He has reiterated that the Fed will not pivot until inflation has reached the Fed’s 2% target and held there for an “extended period of time.” He knows that inflation can come roaring back as it did in the 1970s.
Fiat money does distort the economy immensely. All prices respond to supply and demand. If the fiat money goes to the banks (monetary stimulus) it will inflate asset prices, such as stocks, bonds and real estate. (That makes investors happy but it’s still inflation – P/E ratios rise.) If the fiat money goes to consumers (fiscal stimulus in most cases) it will inflate the prices of consumer goods and services.
The Fed is supposed to maintain a stable dollar. They can’t do this alone since Congress runs huge deficits. To maintain a truly stable economy, the money supply should not increase faster than productivity. Of course, this isn’t happening.
Wendy
Just noticed that Powell also said this at the same time:
Housing activity is bottoming and may already be improving, Fed Chair Jerome Powell said Wednesday.
That is a huge problem. There is not enough housing in the U.S and the prices are way to high for the average buyer.
Andy
I imagine we’ll see more doubling up. More families and/or singles in what is supposed to be a single unit. Perhaps we’ll see a larger resurgence of generational households… grandparents, parents, kids all in one box. Worked before and it seems that life continued on…
Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.
The stocks of home builder companies have been doing well, up almost 50% over the last 12 months.
DB2
Give me another source for Powell saying that. It is so far from the truth I can not at all believe he said any such thing. This is a sellers market. A friend just sold her larger condo. She immediately got $80k over asking. She has four bidders as is common.
There is no bottoming action in US housing. Unless you are talking Montana? Or mistaking New Found Land?
It does not pass the smell test.
Montana is booming. Hard to get or afford a house there anymore.
Andy
I see a lot of that going on now. People going into high end neighborhoods with 2 or more families sharing the home.
Andy
Uh, no.
The dollar had an average inflation rate of **3.08% per year** between 1980 and today, producing a cumulative price increase of 269.09%. This means that today's prices are 3.69 times as high as average prices since 1980, according to the Bureau of Labor Statistics consumer price index.https://www.in2013dollars.com/us/inflation/1980?amount=1#:~:text=Value%20of%20%241%20from%201980%20to%202023&text=The%20dollar%20had%20an%20average,Labor%20Statistics%20consumer%20price%20index.
As this chart shows, the number of times inflation has been at or below 2% in the past 43 years is “16”. Ignore the most recent decade which is clearly the outlier and the number is nearly insignificant. (5/43 for those who are counting.)
And over the last 15 years the average annual inflation rate is 2.3%. Not bad for government work.
DB2
Going further with what Goofy pointed out on inflation since 1980…the rest of the 2020s and 2030s will have lower inflation than the1990s and 2010s.
Demand side econ is an excellent deal. Just because baby boomers do not en masse squat about econ does not mean a damned thing.
