Inflation makes it cheaper to service debt, especially for the Fed’s biggest client the US Treasury.
Today at 8:30 AM ET we get CPI. Here’s my favorite chart of government “inflation” pre CPI release.
None of these really measure inflation as defined as a rise in the general price level, because they all exclude house prices and understate rent increases. And the government’s use of contract rents rather than actual current market rents means that the change in the rent component will lag the market by many months, if not a year or more. So when market rents start to moderate or decline, contract rents will lag that change, leaving the government’s inflation prints higher than actual for months.
We’re not there yet, but that will punch the government statistical manipulators in the face.
Then there’s the business of hedonic replacements, replacing goods that are rising fastest with goods that are similar but with less utility and lower quality, and of course lower prices and slower price increases. So yeah, general inflation really is closer to 13% than 9%. But hey, who’s counting?
Certainly not the Fed.
The Fed chooses not to even try to attack the problem. It falls farther below the real trend of interest rates in the market, which race ahead while remaining 5 or 6 percentage points below the printed inflation rates, and probably 10% below the actual inflation rate including housing measured accurately.
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