Fed holds off on rate hike, but says two more are coming later this year | Hacker News Reader

Fed holds off on rate hike, but says two more are coming later this year

cnbc.com

27 pointsscrlk7 comments

Inflation is already gone, back to secular deflation we go

Core inflation at 4% yoy is not gone.

Core was 5.2% (from report I heard). But it is a dead man walking; the ground has fallen out from underneath it. The two main drivers were post-pandemic-supply-chain-shock oscillations, and corporate monopolistic price-profit increases. The supply chain has largely normalized, shipping rates are collapsing, we're decoupling from China, etc.. And corp pricing power has reached it's limit as consumers start saying "nope, not buying it" and/or downshifting purchases.

Core came at 5.3% YoY for May 2023 and 0.4% MoM.

It has been quite sticky, an seen little change compared on a 3 months annualized to May 2022 (5.3% vs 5.8%).

It might as well be a dead man walking, in the zombie apocalypse sense of the word.

Source: https://www.bls.gov/news.release/cpi.nr0.htm

let's not forget, the CPI is off by about 2%. Just look at http://www.shadowstats.com/ or the big mac index or case shiller index or any realistic measure of CPI.

JP during his talk "inflation has not reacted much to our existing rate hikes". This analysis from Lyn Alden is really good at explaining why https://www.lynalden.com/inflation-vs-interest-rates/

TLDR; The monetary expansion we saw was because of huge government spending during the Pandemic, which boosted growth and jobs. Higher interest rates on government debt just means more money going to the private sector. So Fed's rate rise provided a windfall for those holding government bonds, furthering inflation.

> So Fed's rate rise provided a windfall for those holding government bonds, furthering inflation.

Silicon Valley Bank was insolvent because the value of their government bonds declined so much after the Fed started raising rates. They were taken over by the FDIC after this came to light and the bank no longer exists. I find it hard to characterize that as a windfall.

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