We heard from several central banks in the last few days, and what they had to say was just one more reminder that we are in a Hill Street Blues financial world. So, hey, let’s be careful out there – -and then some!
The Fed’s policy statement Wednesday, for example, was mainly just another trite economic weather report which could have been written after watching CNBC with the sound turned off. But the statement did hint that maybe 78 months of ZIRP won’t be enough, after all. Having stripped out all calendar references relative to the timing of its upcoming monetary body slam, whereupon Wall Street gamblers will be be charged the apparently usurious sum of 25 bps for their poker chips, it hinted at another reason for delaying the dreaded day:
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress – both realized and expected – toward its objectives of maximum employment and 2 percent inflation.
That’s right. If they don’t see enough inflation soon, they will keep Wall Street rampaging at the zero bound even beyond June. It is no longer worth mentioning that there is not a shred of evidence that the US economy would grow faster at a 2.0% CPI inflation rate versus the actual rate of 1.0% recorded over the last three years.
Stated differently, exactly how is it that the tiny dip in the CPI owning to cheaper gasoline during the second half of 2014 once again delayed the promised nirvana of ‘escape velocity’ for the fifth year running? Indeed, the very same Keynesian economists who insisted that the oil price collapse would cause consumer spending to surge are now urging the Fed to delay raising rates because inflation is too low and the US economy has once again stalled-out.
This post was published at David Stockmans Contra Corner on May 3, 2015.
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