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Inflation_ What the Fed is fighting | The Economist.png

The speed and extraordinary casualness with which the Pointless Pain Caucus is throwing overboard two hundred years of monetarist insights that proper macroeconomic policy is for the central bank to intervene strategically in financial markets to keep the flow of nominal spending on a stable path--that is amazing.

That it comes about as every day brings us more news of aggregate demand shortfall is mind-blowing.

Alan Rappeport:

Core US inflation falls to record low: Living costs in the US have been held down by a weakened economy in the past year, with prices for most goods and services recording their smallest annual rises on record in October. Signs of weak inflation will buttress the argument made by the Federal Reserve that it has leeway to engage in more quantitative easing without causing prices to overheat.... Labour department figures showed on Wednesday that the “core” consumer price index, measuring prices for US goods and services excluding food and energy, rose just 0.6 per cent year on year in October. That was weaker than economists had expected and marked the smallest such increase since records began in 1957.

“Today’s CPI report feeds into growing concerns that inflation is stabilising at a level too low for the comfort of the Fed,” said Michael Woolfolk, analyst at BNY Mellon Global Markets. From September to October, core prices remained unchanged for the third consecutive month. Falling prices for cars, trucks and clothes kept costs in check as businesses were forced to offer deep discounts to clear inventory. Overall, the CPI rose by 0.2 per cent in October and was up 1.2 per cent compared with the same month a year ago. The rise was fuelled by a 2.6 per cent monthly increase in energy costs, which have been inflated by higher petrol prices. Adding to price pressures was a tepid increase in housing costs. Rents account for about 40 per cent of the CPI and only rose by 0.1 per cent in October.

In another sign of trouble for the US housing market, the commerce department reported that new home construction fell to its lowest level in 18-months, as a glut of homes already on the market weighed on building activity. Housing starts fell by 11.7 per cent to an adjusted annual rate of 519,000 last month. That was the lowest level since April 2009 and left starts down by nearly 2 per cent compared with the same month the previous year...