Monetary Mission Impossible, Part 4

Let’s see. The Fed’s inflation dashboard is turning into a monetary version of “Honey, I shrunk the kids”.

When you set aside energy, food, durables, other goods and shelter, as Powell & Co have done with their supercore inflation metric, and also drop the completely tainted and absurd medical services component for the reasons we detailed in Part 3, what you have left is the “ultra-supercore”. That is, just 17.6% of the weight in the CPI basket!

Derivation of Ultra-Supercore Inflation Index By CPI Weights:

• Energy: 7.0%;

• Food: 13.4%;

• Durables: 12.5%;

• Other Commodities: 8.7%;

• Rent of Shelter: 34.4%;

• Medical Services: 6.4%;

• Subtotal, Excluded CPI Items: 82.4%;

• Weight of CPI Items In Ultra-Supercore Inflation Index: 17.6%.

As it happens, the Fed’s preferred “supercore” inflation index posted at +4.1% on a Y/Y basis in August and when you delete the phony -2.1% medical services component change, as we outlined in Part 3, the ultra-supercore index computes to +4.7% on a Y/Y basis.

That’s not so copacetic, of course. It amounts to nearly a 40% loss of purchasing power every decade. And even then, the actual August data provide even more reasons to believe that the Fed’s pretensions to manage the inflation rate to precisely the 2.00% target are almost hilariously absurd.