The Fed’s Open Market Committee (FOMC) meeting is today. And according to the SF Fed’s calibration of the Taylor Rule, the Fed Funds Target rate should be 6.13% (it is only 1.25%, a spread of 488 basis points TOO LOW).
There was nothing in this morning’s inflation report that is likely to cause the FOMC not to increase the upper bound of The Fed Fund’s Target rate to 1.5%. Why? Core inflation (less food and energy YoY) declined to 1.71%. Core PCE Prices YoY is at 1.45% YoY (well below The Fed’s Target Rate of 2%.
Owner’s equivalent rent of residences YoY fell to 3.12%, still over twice that of core inflation. And FHFA’s house price index YoY is 2.78x hourly earnings YoY for most of the population.