The Fed Needs More Inflation: 2019 Edition

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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, 104 months and counting.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2019/06/07/the-big-four-economic-indicators-may-nonfarm-employment
june-jobs-nominal

The rate of growth on inflation for both PCE and CPI has been mild.

Most recent CPI data, notice a 1 handle on both core and headline.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2019/06/12/inflation-an-x-ray-view-of-the-components

June CPI breakdown groups short

Also, in less than 2 weeks, we will have the longest economic expansion ever recorded in U.S. history.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2019/05/30/visualizing-gdp-an-inside-look-at-the-q1-second-estimate

June 2019 Q1 GDP 1st rev

The Fed bashing in this cycle is uncalled for because they have executed their dual mandate better than any other time in recent modern day history. Below you can see that for many years I have written about why the Fed would need more inflation, but I don’t really want to be part of a group that has bashed the Fed while their dual mandate has been accomplished.

In 2015  I wrote:

FED And The First Rate Hike

https://loganmohtashami.com/2015/08/16/fed-and-the-first-rate-hike/

In 2016 I wrote:

Fed Rate Hikes Need More Inflation

https://loganmohtashami.com/2016/04/15/fed-rate-hikes-need-more-inflation/

In 2017 I wrote:

Fed Still Needs More Inflation

https://loganmohtashami.com/2017/02/07/fed-still-needs-more-inflation/

In November of 2018, I wrote this article with my own model on what a neutral Feds Fund rate should be

The Fed Still Needs More Inflation: 2018 Edition

https://loganmohtashami.com/2018/11/29/the-fed-still-needs-more-inflation-2018-edition/

I sent this tweet out last October just because the set up for the Fed to be threatened if they don’t cut rates was in the works.

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The most exceptional economy ever doesn’t need a 1% emergency rate cut and QE4. We can all debate on the merits of what the Federal Reserve Fed Funds Rate should be in this record expansion but bashing Chairmen Powell when the dual mandate has been executed is going a step too far.

On a bright note, the Anti Central Bank Gold Standard people, when asked to join the Fed have joined the course of low inflation. If there is one hopeful aspect to this Fed bashing is that finally, the Gold Bugs (outside of a few people of course) has joined the real world. Whatever the Fed decides to do in the next few hours, just be mindful, economics is more than one variable. We don’t dictate godlike powers to one economic person, and if you really honestly believe that then you’re not doing it right. Ask all the recession callers since 2009 how their morbid obsession over the Fed has worked out for them.


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 https://www.facebook.com/Logan.Mohtashami