Rising Inflation Will Force the Fed's Hand

The heart of the article seems to be:

"Over the past 12 months core personal consumption expenditure rose 1.5%, higher than the 1.3% expected. Admittedly this is still low, but it’s likely to go up a lot further."

That's pretty meager stuff here. The Fed is still trying to get inflation up to its target of 2.0%. Monetarists have been warning about inflation since the beginning of quantitative easing, more than a decade ago, and it still hasn't happened -- at least not in consumer prices.

The feared inflation is happening, in the stock market. That's the Fed's real problem: the money they're printing has gone to inflate a stock market bubble. The S&P 500 P/E is nearing 40. The last time it was there was 2001 and 2007, right before big crashes. When the Fed tries to take the punch bowl away, it's going to hurt. A lot.

That's the reason to change strategies, not consumer inflation. Consumer inflation remains low because consumers don't have money. The Fed probably lacks tools to give money to consumers -- pumping it into the stock market just makes people trade stocks to each other, not start new companies to create new jobs. The executive and legislative branches have an effort to pump a meager sum into into actual consumers and that might cause inflation, but it won't be enough to cause much.