The Fed’s Open Market Committee (FOMC) meeting is today. And according to the SF Fed’s calibration of the Taylor Rule, the Fed Funds Target rate should be 6.13% (it is only 1.25%, a spread of 488 basis points TOO LOW).
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There was nothing in this morning’s inflation report that is likely to cause the FOMC not to increase the upper bound of The Fed Fund’s Target rate to 1.5%. Why? Core inflation (less food and energy YoY) declined to 1.71%. Core PCE Prices YoY is at 1.45% YoY (well below The Fed’s Target Rate of 2%.
Owner’s equivalent rent of residences YoY fell to 3.12%, still over twice that of core inflation. And FHFA’s house price index YoY is 2.78x hourly earnings YoY for most of the population.
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