Did Ben Bernanke play croquet with Alice in Wonderland?
- When food and energy and real estate prices rose, the Federal Reserve ignored those price hikes, asserted that those inflations did not count as "inflation," donned its food/energy/asset blinders, looked only at “core” PCE inflation, and declared "low inflation."
- When food and energy prices eased briefly and real estate prices began to deflate, suddenly the Fed decided that those prices do count and again declared low inflation (allegedly caused by those same food/energy/asset prices that allegedy did not matter when they were rising), so it could launch an inflationary interest-rate cut of 50 basis points (bps) to the benchmark Fed funds rate.
Do not be surprised if the figures used to justify the rate cuts are later quietly revised.
Everything means low inflation?
So Fed logic is that food/energy/asset price hikes mean low inflation, and food/energy/asset price drops also mean low inflation.
If people disagree, off with their heads.