[The Soup Nazi]

(cont'd)

Now, you might think that this means that the Fed will have to push interest rates even higher. After all, don’t we need a recession to curb inflation? But here’s the other place where things have gone off script: Despite steady job growth and continuing low unemployment, inflation has in fact subsided. This is true even if you look at measures that try to exclude transitory factors. My preferred measure these days is “supercore,” which excludes food, energy, used cars and shelter (because official measures of housing costs still reflect a rent surge that ended a year ago.):

 

This is the measure I’ll be looking at when new inflation numbers come in tomorrow. (P.S.: The Fed has a different measure of supercore — non-housing services — but when you look at the details of that indicator, it’s a dog’s breakfast of poorly measured components that I find hard to take seriously.)

In any case, something really strange has happened. I can’t think of another example in which there was such a universal consensus that recession was imminent, yet the predicted recession failed to arrive.


Quick hits

Consumer expectations of inflation are plunging.

So are business expectations.

The case for a soft landing.

But pulling soft landings off isn’t easy.