CPI Checks Most of Powell’s Boxes. Now What?
The Fed chair is ticking off his inflation checklist but needs to keep the markets from disrupting his progress.
Hasn't the Fed chair seen almost everything he wanted?
Photographer: Nicholas Kamm/AFP/Getty Images
The inflation story took a turn for the better on Thursday when the government reported that the consumer price index fell 0.1% from a month earlier. Policymakers at the Federal Reserve will play down the report’s significance and reiterate their commitment to keep fighting volatile prices. But in private, they have to be elated.
Consider the situation from the Fed’s vantage point. Less than two months ago, Chair Jerome Powell laid out his framework for thinking about inflation in a speech at the Brookings Institution. Today, most of his hopes and dreams are already being realized. Supply chains are healing and core goods prices are cooling while forward-looking gauges of market rents signal shelter inflation is poised to come down soon as well.1 Perhaps most important, central bankers have received encouraging evidence regarding core services excluding shelter — that all important, wage-driven component of CPI that Powell feared would be the hardest to tame.