The PCE, the measure the Federal Reserve Board says it watches most closely, what with its under-weighting of shelter costs—half that of the CPI, which itself is distorted lower by using Owner's Equivalent Rent—and all, first crossed the Fed's 2% line in March 2021.
The Fed could have acted on its balance sheet and on interest rates at that time.
Giving them the benefit of the doubt, that they wanted to be sure a rising trend was in place, they could have acted after the April release.
Ditto for a desire to target 2% as an average, meaning running hotter than 2% to bring the trailing average up. By May 2021 with the PCE printing at almost double the Fed's stated target there was no reason to delay tapping on the brakes, beginning the interest rate hiking cycle and announcing the start of Quantitative Tightening - perhaps not going into run-off mode but balancing new purchases of treasury's and Agency MBS's with maturing paper.
They didn't.
And for some reason the Fed thought it more important to delay action than it was to appear credible; what with the "transitory" talk and all. And the Fed kept delaying, and kept on spouting non-sense for a year after they should have taken action.
Again, for emphasis, the Fed knowingly decided to look like stupid liars rather than honestly explain what they were up to. The question is: Why would they do that?
All I can surmise is that it must be something really, really big to let CPI inflation get to 8.6% while talking stupid shit all the way up.
From Trading Economics (also on blogroll at right) the monthly YoY PCE prints:
