Inflation falls 0.1% in June from prior month, helping case for lower rates

[progree]

13. CPI Year Over Year vs. Fed Funds Target Rate Graph

Last edited Sat Jul 13, 2024, 07:51 AM - Edit history (6)

Blue: CPI,   Red: Fed Funds Target Rate
November 2019 - June 2024

It used to be that most here were blaming the Fed for stupidly believing that inflation was transient and taking way too long to raise rates to bring it down. Kinda looks that way. The first tentative little quarter point rate increase was March 17, 2022, 14 months after year-over-year inflation went north of 2%, and had reached 8.5%.

Except I don't know about "stupidly" - for a while some were saying that the excess inflation was natural and healthy make-up for nearly a year of well below 2% inflation. And that a large part of it was a natural response to the economy opening up and recovering after the pandemic shutdowns, plus supply chain issues. All very reasonable, but went well past their "best used by" date.

CPI: https://data.bls.gov/timeseries/CUSR0000SA0
FedFunds Target Rate (I used the upper end of the 0.25% width bracket): https://www.federalreserve.gov/monetarypolicy/openmarket.htm

Here's the same graph, but I added the rolling 3 month average CPI (thin blue line) to it:


November 2019 - June 2024

I'm fond of the 3 month averages as they are an average of 3 data points (so can't be easily dismissed as a "one off", unlike a single month-over-month figure), and they have much more recency than 12 month averages (yoy). I think of them as kinda a smoothed version of month-to-month.

CPI vs. Core CPI since 2019: