This is a syndicated repost courtesy of Confounded Interest – Online Course Notes for Financial Markets. To view original, click here. Reposted with permission.
I remember when Federal Reserve Chair Janet Yellen said that inflation is just around the corner. It must be a really long street.
Consumer price indices for December are out and CPI MoM rose 0.1%, but Ex Food and Energy it rose 0.3%. CPI Ex Food and Energy YoY rose 1.8% from 1.7% in November.
Despite its wishes to generate inflation with zero interest rate policies and QE, inflation remains stubbornly low (below 2%). Core PCE Prices YoY is even worse at 1.50%.
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Of course, home prices are growing at 6.6% YoY, over 4 times core inflation (PCE).
Although imputed rent growth YoY is only 2x core inflation (PCE).
So, home prices and imputed rent of dwellings are both rising at multiples of the core inflation rate … and wages.
Hopefully Yellen’s replacement can do better in terms of slowing down bubbles. But I doubt it.
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