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Between a rock and a hard place

The chairman of the Federal Reserve gave a speech yesterday at a conference in Portugal and said: “We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy”. It’s still not clear if he refers to PCE (2.6%) or Core CPI (3.4%) or headline CPI (3.3%), but the fact of the matter is that it seems that, absent any crisis, the Fed intends to hold rates unchanged unless we see a meaningful decrease in any or all of the inflation indicators presented above. And perhaps the only way we’ll see that decrease in the short term is if we get into a crisis. The Fed continues to be caught between a rock and a hard place.


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