The Fed, Inflation, Recession and the 3% Solution

Federal Reserve Board chairman Jay Powell knows the difference between winning a battle and winning a war. Recent data suggest he is winning the battle against inflationary increases in prices. Last month the Consumer Price Index rose at annual rate of 7.1 per cent, “only” 7.1 per cent in the same sense that Elon Musk’s fortune has fallen in half to only $170 billion. Because the 7.1 per cent increase followed one of 7.7 per cent the previous month and 9.1 per cent in June, and was the smallest increase since Santa’s last visit, it is easy to forget that it is around three times the (differently measured) Fed target of 2 per cent.