As we've been saying for a year-and-a-half, this inflation is deliberate.
It is not incompetence, it is not a policy error, it is certainly not transitory.
The thing is, I'm not sure why the powers-that-be wanted this result. Again, this is no accident. Here's the monthly U.S. CPI headline number from Trading Economics (also on blogroll at right):
This is a very real problem and probably means a Fed overshoot is baked in the cake....
And here is a June 29, 2022 post:
Ahead of Tomorrow's Personal Consumption Expenditures Inflation Report, A Reminder
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% [note: May CPI] while talking stupid shit all the way up.
And the headline story from The Asia Times, October 12, 2022:
US prices were already rising sharply in the two years before the Russian invasion, with consequent declines in living standards
An inflationary tsunami is passing through the world economy, creating economic disorder – in some cases acute political crisis – in every country it touches. This is gathering momentum as the US attempts to control inflation by rapidly raising interest rates, forcing the other Global North economies into recession.
The Global South economies have been thereby struck by a quadruple whammy producing still more severe stagflation, rising inflation, and slowing growth than in the Global North.
First, rising US interest rates force up the dollar’s exchange rate against the currencies of developing countries, increasing import prices that are usually set in dollars, thereby worsening inflation for these developing countries.
The Ukraine war started on February 24, 2022, but US consumer prices had already been rising sharply for nearly two years before that. More than 90% of the US price rises in that period took place before the Russian invasion of Ukraine. Therefore, it is important to think critically when the US blames Russia for the worldwide inflation and the resulting reduction in living standards.
The huge US inflationary wave, which spread globally with only a two-to-three-month delay, since the US is the world’s largest economy, took place before the Ukraine war. As the Wall Street Journal editorial board noted, “This isn’t Putin’s inflation.… This inflation was made in Washington.”
What caused the US inflation?
It is easy to explain in technical economic terms why US inflation soared; it was analyzed as it occurred by US economists such as former treasury secretary Larry Summers. In May 2021, Summers warned:“We’re taking very substantial risks on the inflation side.… The Fed’s idea used to be that it removed the punchbowl before the party got good.… Now, the Fed’s doctrine is that it will only remove the punchbowl after it sees some people staggering around drunk.… We are printing money, we are creating government bonds, [and] we are borrowing on unprecedented scales.”
But more important than a technical explanation is understanding the social role of inflation. Inflation shows that demand is higher than supply, putting upward pressure on prices of goods and services. So with no increase in supply taking place, demand has to be cut back. The key social question is: Which US spending would be cut?
Many US reforms could be implemented by cutting demand and reallocating spending, thereby reducing inflationary pressures, while not reducing US living standards – indeed, these reforms would improve US economic efficiency and living standards.
US military expenditure is the highest in the world, more than that by the next nine countries combined. This spending, which amounts to 3.7% of US GDP, could be reduced with no decline in living standards.
As well, in 2020 US expenditure on health care reached 19.7% of GDP, almost one-fifth of its economy. But the US private health-care system is very inefficient. The US spends more on health care as a share of its economy than any other economy in the world, but the US life expectancy is only 77 years, compared with an average of 83 years in other high-income economies.
