Oddball Inflation Drivers Undermining Rate Drops

Inflation isn’t a simple thing and the Federal Reserve’s response to it isn’t either as price increases are now always transitory. To assume that the Fed will always have the most desired response to inflation is unrealistic. There are multiple factors that could undercut the hope for rate reductions this year.

As a reminder, the current Fed has shown itself capable of misreading the economy. Those “transitory” price increases kept going up, and eventually so did the interest rates. Even when supply constraints that likely caused much of the inflation wouldn’t necessarily respond to that type of pressure. Even when there’s evidence that many companies used inflation as an excuse for pricing power to boost profits, as the Financial Times just reported, It pointed to the continued elevation of consumer goods prices, even as the Producer Price Index has been retreating.