A Shadow of Inflation: Is the Fed Ready to Cut Like Butter Through a Balrog?

The Whispers of Mordor: Inflation's Shadow Lengthens

Hoom! Well met dear readers. Gandalf the Grey at your service. I come bearing news though perhaps not of the joyous kind. It appears the subtle creep of inflation continues much like the slow insidious spread of Mordor's influence. The personal consumption expenditures price index a tool used by the pointy hatted wizards at the Federal Reserve has shown a slight rise of 0.1% in May. This puts the annual inflation rate at 2.3%. Not quite the fiery doom of Mount Doom but a smoldering concern nonetheless!

Not All That Glitters is Core: The Heart of the Matter

Now the wise amongst you (and I trust you are all wise or you wouldn't be reading my report!) know that one must look beyond the surface. Excluding food and energy what they call the 'core' PCE we see a rise of 0.2%. Why exclude these you ask? Because my friends their prices dance like hobbits after too much ale – unpredictable and prone to wild swings. The Fed in their long winded pronouncements see this 'core' as a truer measure of the long term which let's be honest is longer than a dragon's hoard list!

A Target Missed: When 2% Feels Like an Eternity

Alas the Fed aims for an inflation rate of 2% a target they haven't hit since what feels like the First Age. They pursue this number with a ferocity usually reserved for Orcs chasing elves. Whether they shall reach this goal only the Valar know and they are notoriously tight lipped these days.

Spending and Income: A Fading Fire?

But wait there's more! Consumer spending much like the wood in the fires of Edoras seems to be dwindling falling 0.1%. Personal income has also shrunk a decline of 0.4%. These numbers tell us that our economy's vigor is becoming more feeble and so we must ask ourselves is it a long winter coming?

The President's Ire: A Wizard is Never Late Nor is He Early...

Ah yes the President and the Fed. A tale as old as time though usually less… public. He has been shall we say *persuading* Fed Chair Powell to ease up on interest rates. The President believes that inflation is under control and should it not be the gears can always be switched again which does sound like something Sauron would say. Chair Powell is hesitant for he knows that such pronouncements are to be taken with a grain of salt much like the promises of Gollum.

A Rate Cut on the Horizon? One Does Not Simply Cut Rates...

Many whisper of a possible rate cut in July a notion considered premature by some. This is a complicated matter fraught with peril much like navigating the Mines of Moria. Whether the Fed will heed the calls of the market or stay its course remains to be seen. But remember my friends even the smallest person can change the course of the future... or at least adjust the interest rate.