The sources of US inflation are mismanagement
One number in the CPI report will fire-up the Fed hawks -- 2.3%.
That's the year-over-year core inflation reading and it's proof, to some, that there really is inflation in the US and that a 0.50%-0.75% Fed funds rate is far too low.
But if you drill down even further into the core numbers there isn't much to it. The numbers in the far right column are year-over-year inflation.
Apparel, no inflation. Vehicles, no inflation. Commodities, deflation.
The two things that account for inflation are healthcare and shelter.
Medical care services costs rose 5.1% y/y. Is that a sign of an economy that's heating up? Is that something that higher interest rates will solve? Will that solve higher car insurance rates?
Absolutely not. It's symptomatic of generations of mismanagement and patchy solutions.
On shelter (which is 42% of the weighting of the CPI), rates are certainly part of the story but managing housing supply problems with interest rates is poor idea. US housing still hasn't recovered the losses in the bust and another bubble in housing is far away.
