The Inflation the Fed Can Do Least About Is Rising Rapidly

Acyclical inflation is rising toward 2%, a level where the Fed's monetary policy tools traditionally have little impact and real rates often turn deeply negative.

Key Takeaways

• 1.Acyclical inflation, which the Federal Reserve has minimal direct control over via monetary policy, is rising rapidly toward the 2% threshold.
• 2.Historically, real rates tend to fall and become deeply negative when acyclical PCE exceeds the 2% level.
• 3.The rise in acyclical inflation was evident before the Iran war but is expected to be further exacerbated by the conflict.

Table of Contents

• The Inflation The Fed Can Do Least About Is Rising Rapidly
• Inflation Fed Has Less Control Over Is Rising

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