Two Fed Governors are speaking out today, one for and the other against a September rate hike. Hedge fund managers and purveyors of bonds are also chiming in. The reason why opinions vary is because there will be positive and negative ramifications when rates do start to increase; one answer will not fix all of the challenges facing our economy. While I think that raising rates is a healthy thing to do, I don’t see that the economic indicators of well-being are any better than they were a year ago. It’s sort of like kicking your 30 year old son out of the basement. Sure, he still can’t hold a job, but dude, it’s time to move on. The question is when and how.
The only economic report out today that offers any guidance is the Consumer Price Index, which measures inflation at the level that you and I experience it. The CPI rose 0.1% last month and only 0.2% from this time last year. That annual number of almost zero is a rare occurrence. Perhaps even more interesting though is that when you remove the cost of food and energy from the inflation equation, CPI rose 1.8% from a year ago–meaning that the retail cost of these two sectors has decreased from a year ago, a rare occurrence indeed. “Hey Johnny, your mom and I would like to talk with you about your future…”