The Fed Still Needs More Inflation: 2018 Edition


First and foremost, I want to say I am a big fan of what the federal reserve has accomplished in this cycle. They have done a great job with their dual mandate as we have had the longest job expansion ever on record, 97 months and counting. The rate of growth on inflation for both PCE and CPI has been mild. Next year will have the longest economic expansion on record. The question now is where the federal reserve neutral rate is?

In 2015  I wrote:

FED And The First Rate Hike

In 2016 I wrote:

Fed Rate Hikes Need More Inflation

In 2017 I wrote:

Fed Still Needs More Inflation

What is a proper neutral federal reserve fed funds rate in this modern-day age of demographic deflationary factors and internet sales keeping PCE low?

I am just going to leave my model for a federal reserve neutral rate as I am no one, but I am willing to put a model up for the sake of a conversation.

It would be a 10 year moving average of PCE rate of growth + 0.25%, and then we take it from there to see if real inflation can grow.

From Doug Short:

December PCE short December PCE Long

From Doug Short:
December Core PCE and CPI


Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page