Commentary
The Federal Open Market Committee’s unanimous decision on Wednesday not to raise the federal funds rate, which banks charge each other for overnight loans, has champagne corks popping in some quarters, where it is hailed as evidence of the long-in-coming conquest of inflation; while others see Federal Reserve Chairman Jerome Powell turning chicken in the face of a long-term price problem that needed far more drastic, sustained measures than ten consecutive months of Fed funds rate increases totaling 500 basis points.
The Consumer Price Index may have dropped every month for almost a year now, sinking to its current 4 percent. But core inflation—which excludes the volatile, and therefore sometimes misleading, categories of food and gasoline—rose another 0.4 percent in May, as it has on average during the preceding months of this year. It remains at a year-over-year high of 5.3 percent. Both that and the 4 percent CPI are far above the Fed’s target of 2 percent inflation….