Economic Old Age, Part 3: Counting Inflation On The Head Of A Phillips Pin

Now that the US economy has reached the #2 spot in the annals of business cycle expansions at 106 months of age, the Keynesian economists on Wall Street are starting to gum about the second decimal point in the monthly inflation print. As one of the geniuses at Deutsche Bank, Torsten Slok, recently pontificated,

 “Since the financial crisis core PCE inflation has been below the Fed’s 2% target. As a result, the narrative in markets has been that ‘there is no inflation’ and ‘inflation is not a problem.’ But now core PCE inflation has reached 1.9 percent and in our view it will reach 2.3 percent by the end of this year. This will change the discussion in markets from inflation is too low to instead, inflation is too high and is the Fed doing enough to keep it from rising further?”


Is there one shred of evidence that the microscopic variance between 1.9% and 2.3% inflation on the PCE deflator makes any difference to the performance and prosperity of the main street economy? Or that the Fed can fine tune the difference in any event?



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