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Core PCE Prices YoY (“Inflation”) Fall To 1.4% In July (The Dreaded Inflation Mirage)

This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.

Federal Reserve Chair Janet Yellen and the Federal Reserve Open Market Committee (FOMC) are frustrated in their inability to generate even 2% inflation (as they define it). Personal Consumption Expenditure Core Prices YoY for July fell to 1.40% YoY.

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The PCE Core DEFLATOR YoY remain at 1.4% YoY for July.

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Personal income and spending both rose in July, but personal spending was lower than forecast.

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According to the Taylor Rule (Rudebusch specification), The Fed Funds Target Rate remains 446 basis points below where it should be.

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Bear in mind that The Fed’s definition of inflation (Core PCE Prices YoY or the Core PCE Price Deflator YoY) effectively leaves out home prices which are currently growing at 2x wage growth.

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Inflation (without home prices, food and energy) remains a mirage.

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