Inflation Alert! The Bureau of Economic Analysis today announced the PCE price index without food and energy was up by 3.6% in September--compared to a year ago. This is the highest PCE inflation reading since 1991.
The red line (sorry not a straight line) is the Fed's 2% target for inflation. As we can see, we have blown past that! Again, we haven't seen readings this high since 1991!
Remember, this number is manipulated by excluding food and energy. By doing so, items regular people spend a LOT of their money on (food and gas!), are excluded from the Fedโs inflation measure.
Why are they doing this? Because prices of food and energy jump up and down a lot (this is where the real transitory action goes down!) and creates even more volatility in the inflation index, which JPow can't have!
All of this inflation and The Fed is still continuing to plow away with $120 billion in assets purchases each month:
$40 billion a month in mortgage-backed securities. This will continue to depress mortgage rates and only continues to add gasoline to the inflation fire.
$80 billion in Treasury securities a month (with policy rates near 0%): represses short-term and long-term interest rates in general, and inflates asset prices and consumer prices, which further DESTROYS the purchasing power of the dollar.
TL:DR - The Dollar losing purchasing power + Inflation = Permanent Loss of purchasing power. Unless one of the many other catalysts triggers the MOASS, I believe inflation is the match that has been lit that will light the fuse of the rocket.
Buckle Up.
