The Federal Reserve relies heavily on backward-looking 12-month inflation measures like the Year-over-Year CPI, which showed 3.4% in July, while the 3-month annualized CPI is just 0.49%. Despite this divergence, three regional Fed presidents voted to raise rates immediately, though market consensus flipped from 80% expecting a September hike to 67% against it. Economic indicators are weakening, with negative July jobs numbers, declining labor participation, falling home sales, and retail spending down. Kevin Warsh has launched task forces to improve the quality and timeliness of economic data informing Fed policy.
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