FOMC Day: Dec 13, 2017

It’s that time again — when the FOMC does its level best to convince investors algos that they should be optimistic buy more equities.  Lately, this has meant a not so subtle message that rates are normalizing rising ever so slightly, inflation remains under control disappointing and the future looks strong good enough.

We touched on the inflation scam in yesterday’s post: PPI Tops 3%.

The primary culprit: gasoline prices, which BLS officials say increased 15.8%.  Imagine what PPI would have registered if they’d used EIA-fabricated data (+17.4%) or the actual increase over Nov 2016 of +20.3% [see: Again, With the CPI Games?]

Today, thanks to the miracle of seasonal adjustment, we learn that consumers experienced a mere 7.3% YoY increase in the price of gasoline, yielding a YoY CPI increase of only 2.2% (core came in at 1.7%.)

This assessment, of course, flies in the face of virtually all the data as well as every consumer’s experience.  But, otherwise, it’s sound as a pound.

The important takeaways: inflation is not a problem (unless you care about facts) accommodation should continue (because we all know what would happen without it), and rates should gradually increase (even as the curve collapses, because they need a higher perch from which to reduce rates the next time markets collapse.)

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