Inflation Targeting Unmasked——-Today’s CPI Crushed The Case For ZIRP

Well, that was timely. The August CPI came in at -0.1% and is up a mere 0.2% over the past year. So Janet Yellen can now say, look ma, no inflation!

Once again, therefore, the Fed has an excuse to keep shoveling free money into the casino. If Stanley Fischer insists that more evidence is needed that consumer inflation is progressing toward its intended 2% destination, and Bill Dudley persuades Yellen Co. that financial conditions have already “tightened” by 25 basis points, as measured by Goldman’s spurious Financial Conditions Index (GSFCI), we will get the 81st month of ZIRP; and with it a short-lived relief rally, not the Wall Street hissy fit that is long overdue and eventually unavoidable.

Alas, we will also get a vivid demonstration that main street America is being put in harm’s way by the posse of cowards, dissemblers and academic fanatics who run the world’s most powerful central bank. The evidence is right below in the summary table from this morning’s BLS inflation report.

It shows quite clearly that prices of commodities and goods are falling in the wake of the intensifying tide of global deflation, while the cost of shelter and domestic services is moving higher at a spritely pace. Accordingly, it does not take a PhD in economics to figure out that the resulting “average” rate of price change for the BLS’ dubious market basket of consumer items is purely a statistical accident, and absolutely outside of the Fed’s ability to shape.

In fact, it makes a mockery of the Fed’s insensible commitment to 2% inflation. The latter has always amounted to a policy target confected from wholecloth, anyway, since it is not contained in or required by the Humphrey-Hawkins Act, nor is it grounded in a shred of historic evidence that decimal points of difference around 2% consumer inflation have anything whatsoever to do with economic growth or gains in societal wealth and living standards.

But now you have a

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