Fed's Preferred Inflation Gauge Hits Target For First Time In 5 Years

Tyler Durden's picture

Is this why the 'data dependent' Fed is suddenly so keen to hike rates?


For the first time since April 2012, The Fed's preferred inflation indicator - the so-called Personal Consumption Expenditure Deflator - has topped 2% (The Fed's mandated goal).

So unless The Dow drops by more than 3%, The Fed will keep hiking based on this 'data', no matter what the rest of the economy is doing.

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Bigly's picture

Right before it picks up speed to the moon, alice

LawsofPhysics's picture

^^^this.  Once again the bankers and financiers are intentionally way behind the curve...


..and why wouldn't they be?  If you could issue paper/digits that people would accept in exchange for their assets and labor, you too could buy the fucking planet!


Absolute power corrupts, absolutely...

notRobot's picture

Agreed 100% that there is perhaps no more reliable axiom describing social dynamics than "Absolute power corrupts, absolutely..."...

But why does it only last a while longer? I, too, have bet (foolishly in some cases it turns out) that the end is nigh. My gut tells me the great sea change, the zombie apocalypse, 4th turning, next crisis--what have you--is coming in a few minutes. And I've felt like that for nearly 10 years now! "Wrong but early" we can say. I join you in wanting to stay vigilant, watch for signs, be vigilant to see the first hints of burning Rome before anyone else sees smoke. But man! It takes a lot of energy. A lot of minutes on ZH:) I don't know whether to call us tenacious or wasting our energy. What new signal do you see (beynd the unsustainable credit and money-flow system and the violent geopolitics is pays for that we prattle on about breathlessly)? Why is it about to happen? I think we could do each other a lot of good by being more specific: what do you see that makes the situation more impending than yesterday or last week or last month?

LawsofPhysics's picture

Don't waste your time trying to answer such questions life is far too short and humans have always had a problem with things that are real, but hard to see right before them (think plate techtonics etc.). Regardless, exponential equations and moral hazard are real motherfuckers. Everything will be fine one day, things might appear only slight worse  the next, then simple, but rather important things simply won't be available.  It's human nature to whistle past the graveyard.

Another one of my favorite quotes;

“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”
notRobot's picture

What amazes me is talking to economics Ph.D.s working in the FED system is this. I make the Austrian case. The 2% inflation target is an artefact of extremely payoff-reinforced socialization in the post-grad programs mostly but elsewhere, too. At a rate of LESS than one in 100 economists, you DO find a treasury staffer, some quite senior, now and then who can agree with me (and many of us I guess on ZH) that 0% inflation would be a better inflation target (if you're going to have a central bank and inflation targets in the first place). Such people DO exist. Even the 2%-ers acknowledge that ZIRP is bad for seniors with savings, etc. BUT...then they bring up the babysitting coupon experiment as example of how monetary authorities can use monetary stimulus to get out of a bad recession or disequilibrium by tricking people about nominal v real changes.

I think most of them simply have very few friends or family members who feel any pince whatsover from 2% inflation. It's hard for them to sympathize with small business owners, for any of us who have worked, saved, and want a store-of-value technology that's not taxed by the money masters who are enabled only because of political cover to make new loan entries as commercial banks. That's it. Criminally insane. And normal. All at once.



notRobot's picture

Like i was saying! Not what i want...but everything keeps reverting from "impossible precipice, FED has lost control, ..." back to post-2008 normal. If the paymasters really are in conrol, then indeed the stuff we're hyperventilating about is, as Engali reminds us, indeed transitory. It changes when ((they)) want it to change? Or we have agency to change it our way?

Seasmoke's picture

Bullish for Gold.

/s. (Nothing is Gold Bullish any more)

Bill of Rights's picture

And Gold sits there with its head up its ass...ludicrous Gold is an inflation hedge and should be rock'en and roll'en...It rolls alright DOWN!!!!!!!!

new game's picture

lagging indicator. as usual, the fed will chase the problem they created.

but, oh my oh my, all those treasuries...

divingengineer's picture

$3.7 Trillion in QE (that we know of) and 2.1% inflation is the result?

There is something very wrong with this picture.  How could they hold $3.7 Trillion of purchases and repos so tightly that it never leaked out into the economy? Aside from a few thousand Wall St. assholes buying $100 Million dollar mansions, new jets, yachts, tasteless modern art and Ferraris could they have really kept this money out of the real economy?

I'm not sure what to believe anymore, and it probably doesn't matter anyway. 

VarenneRiver's picture

Now people have to get more in debt to the banks to make asset purchases or sacrifice food. No wonder this is bullish!

new game's picture

it is called circling the black hole of debt death. or a giant terd circling the shithole. take your pick.

divingengineer's picture

I guess it is time to start playing the game like bankers. 

Live large, borrow big, default, rinse, repeat. 

Fake Trump's picture

The shit will soon hit the fan. LOL. The big woman will hike rate again soon. The days of cheap money will be over soon I hope. Problem. How Uncle Sam is going to pay the interests on his debt. 

Bill of Rights's picture

Raise your taxes of course...Dope.

FreeShitter's picture

Hope again? Uncle Scam always can raise your taxes ^. Tails they win, heads you lose....

LawsofPhysics's picture

Raise taxes and send your children to war.  Where the fuck have you been?

chunga's picture

My preferred gauge to target the Fed with is 12.

divingengineer's picture

@20% inflation those debts will look a lot less menacing after only a few years.

When a can of coke costs $22 will your $225,000 mortgage really seem that big?

If wages are allowed to rise, I can't guarantee that part. 

Fed-up with being Sick and Tired's picture

I wonder what the game is here?   IF they raise interest rates, we can no longer afford to Ponzi up our debt!!!???


Can anyone attempt to explain this to us?   ZERO HEDGE editors, can you take a crack at this question?  HOW can America pays its own debts (I am LOLing when I write this) because we know that this is a huge ponzi scheme!!

new game's picture

dethrone trump? create crisses for one world solution via immense power centralized. cashless? all of these. hey never create a crisses without a solution at hand. they are the powers to be. they will, of course solve the proplem at our expense. cueing hank the crank...

notRobot's picture

I want to know the same thing. Could it be that the textbook "money illusion" (paying attention to nominal amounts currency units and ignoring purchasing power of all flows demoninatd in currency units) is the simple explanation? Econ textbooks teach that the fed targets 2% inflation in part to make it easy for employers to cut real wages by approx 2% each year without raising a stink but reducing the number of currency units. Just hold nominal salaries flat and let 2% inflation take its course. Is this incredibly basic parlour trick that prepubescent math students with a bit of algebra and knowledge of percentage change arithmetic--is this really enough for the controllers of our money to keep balls in the air? They keep expanding credit and selling treasury debt at 2-4% nominal and sucker every pensioner into accepting annual 8 or 6% declines in real purchaing power per year? Sounds too simple. But that doesn't mean it ain't describing what's happening or (perhaps different, perhaps same) how ((they)) think.

divingengineer's picture

With normalized inflation and interest rates I think you will be much happier than you would with 0% interest rates and 15% hidden inflation. 

With inflation you can at least grow out of your debts. You buy a house, it seems expensive at the time, years later you look around and say damn, I'm glad I bought when I did. After a few years in your unaffordable house you realize you couldn'd rent an apartment for what your mortgage payment is. 

Inflation both helps and hurts, your scenario assumes you never get a raise or pay adjustment to reflect inflation. Most companies are not that myopic to inflationary effects, if they are, they lose their people to companies that aren't. 

GlassHouse101's picture

yeah, but wage growth is like this --------\________

divingengineer's picture

I think the assumption at this point is that we are supposed to eat the first 2% of inflation, after that employers may start chipping in.

We'll see, that is just a guess based on language that employers and the govt uses. 

rejected's picture

" has topped 2% (The Fed's mandated goal)."

Mandated Goal their currency loses 2% of it's perceived value each year... LOL.

They have destroyed the currency, the markets, and the economy and still their treated as gods.

notRobot's picture

yes. matches my line of thinking above. could it be that simple? seems like it should be more sinister than that! But that's what the orthodox bank suppporters say about Wahnsee documents: "the shocking simplicity and banality of evil..."...I don't say I subscribe to it. But we who imagine complex structural machinations to explain the BS we see might be mostly wrong, too!:)


divingengineer's picture

Nothing seems to work anymore. $3.7 Trillion in QE and what did it do? Not a damned thing. Throwing money at it is a fail, they have to massively deregulate or something.


Byte Me's picture

Because the  "Hookers 'n Blow" NDX was so much a lagging indicator.

Audit the FED

Abolish it.

notRobot's picture

Concur about abolishing it. But what do you have against the New Zealand stock exchange, mate?

Byte Me's picture


Got the wrong handle is all.

silverer's picture

Of course the Fed can control the rate of inflation by changing the stated rate of inflation. Want the number higher? Just add in food. They've pulled out anything that made Obama look bad for the last eight years. Just put a little data back and PRESTO! Inflation is up!

khakuda's picture

Hey Fed, time to change the preferred inflation benchmark again to pretend there is no inflation again.

To say inflation is only reaching 2% has no basis in reality.  It has at probably been at least twice that level if measured in an unbiased way.  And if inflation is 2% by their BS measure, why are interest rates at .75%.  Shouldn't they be at least 2%?

They know what they are doing and they should all go to jail for theft.

notRobot's picture

Best comment on this thread right here. The textbook models the FED economists pay obesiance to say that, given a positive time value of money, interet rate = time premium + risk premium = (after log approximation) real rate + inflation rate. Therefore given inflation = 2%, real rate = -1.25%.Theft. They strip assets from the hard workers without the political connections, psychological insecurity and/or sociopathy to pursue plitical connetions that protect wealth in a fraud-based economy.

esum's picture

I liked in the fall of the Soviet Union how the Russian managers drove companies to the brink of bankruptcy .... and then bought the assets for pennies on the dollar...

notRobot's picture

Most overeducated people i work with claim the world is too complex and hard to control to achieve what you mentioned, but I think there may be something to your hypothesis. It's the same story as happened more than a century ago in England, creating contained and controlled "chaos' (appearance thereof) on the trading floor with FALSE NEWS that the French had bested England, leading to intraday asset price crash and the informationally priveleged elites scooping up everything of genuine value for pennies on teh dollar.