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If Fed Chair Jerome Powell was less buttoned-up, he would be perfectly within his rights call a news conference, walk up to the podium in a T shirt and board shorts, and say three simple words: 'Soft landing, jerks' Before dropping the microphone and walking away, Powell dropped his mic.
Jay wouldn't do it, of course. I can't imagine him silently fist-pumping when he heard the latest inflation figures.
ICYMI, the Consumer Price Index (CPI) measured annual inflation at 3% in the last month. This is the lowest rate for more than two-years and the 12th month consecutively of declining prices.
To put things in perspective, the CPI peaked last year at 9.1% - the highest inflation rate for more than 40years.
Bill Adams, Comerica Bank's chief economist, wrote that after a long period of price increases, "the fever has broken."
This is definitely a fan-freakin'-tastic movie.
Many Twitter users argued that the CPI report on Wednesday was not a complete success. Core inflation, which excludes energy and food prices, remains uncomfortably elevated at 4.8%. We are objectively better off today than a year ago and all signs indicate that inflation will continue to decline.
For the record, the Fed's inflation target is 2%. While the CPI is the most popular inflation indicator, central bankers prefer a different measure, the Personal Consumption Spending Price Index. The latest core PCE index was 4.6% for May.
Jay Powell and Co. can't probably go on vacation just yet.
Lael Biden, the top economic advisor to President Biden, said: 'We have seen repeated predictions of a recession, but the data has shown that the economy is still resilient.' The US has defied expectations that the inflation rate would not fall without significant job losses.
Brainard's resilience is:
The labor market remains stable, despite the fact that rising rates are usually a problem. Even though wage growth hasn't kept pace with inflation for most of the last two years, it appears that this is changing. In June, wages were up by 4.4%.
The Fed could actually achieve the soft landing -- lowering the inflation rate without destroying the economy -- which few thought possible even six months ago.
Dan Alpert told me that the odds of a soft landing had increased dramatically. 'I am not saying that there will not be a recession. I just believe the recession won't happen in 2023.
Jamie Dimon of JPMorgan Chase, who warned last year that an economic "hurricane" was on its way, has now reassessed. In a recent interview with The Economist, Dimon said that the storm clouds were only partially present.
Bottom line: the CPI gave us a rare bit of good news. The Fed deserves some credit for the relatively easy disinflation - sans mass layoffs - over the past 12 months. The markets still expect the Fed to raise rates again later this month. However, they are now expecting that it will be the final tightening.