This is a good question, and a long topic more deserving of its own post someday! But the general idea is that the Fed best controls the labor market and the level of aggregate demand or total spending in the economy. Since the majority of total spending goes into core services and that the input cost for many services is primarily labor, Fed actions end up showing up most clearly and consistently in services prices. That's especially true now, when a lot of the month-to-month fluctuation in core goods costs is about car prices.
Thanks for providing additional granularity into inflation's disposition. I envision continued rate hikes and potential ad hoc austerity to curtail the slope.
>More difficult is that core services—the item that the Fed has the most control over—only represents 3% of current inflation.
This was interesting to me. Why is core services more under their control than core goods?
This is a good question, and a long topic more deserving of its own post someday! But the general idea is that the Fed best controls the labor market and the level of aggregate demand or total spending in the economy. Since the majority of total spending goes into core services and that the input cost for many services is primarily labor, Fed actions end up showing up most clearly and consistently in services prices. That's especially true now, when a lot of the month-to-month fluctuation in core goods costs is about car prices.
Thanks for providing additional granularity into inflation's disposition. I envision continued rate hikes and potential ad hoc austerity to curtail the slope.
No doubt it will make the Federal Reserve go for a substantial rate hike. It makes a recession more likely.