What's the big deal?
As the F_O_M_C starts their 2-day meeting tomorrow with a policy announcement and perhaps another disastrous press conference by Janet Yellen, the F_E_D has reached their stated gaol of 6.5% unemployment, actually surpassing it at 6.3%. The other mandate is inflation and the F_E_D's long term inflation target of 2%, this morning's CPI data threw in to serious question just how much longer the F_E_D can keep low rates and easy monetary policy despite the taper.
Core CPI printed at +.4%, the largest gain since August of 2011 on expectations of .2 and a prior of .3%. One month does not make a trend, however, Core CPI was at 1% just 8 months ago (excluding volatile food and gas).
When food and gas is thrown in the mix, it gets even worse, Food printed at an inflationary gain of +.5%, this after printing +.4% each of the 3 previous months, suddenly things are looking a lot more like a trend. Energy printed at +0.9% and all of this while May wages fell .2% and .1% for the full year, inflation is outpacing wages by a healthy margin, this has to give rise to fears about the F_E_D's easy money/ZIRP rate policies and right before the F_O_M_C tomorrow in a market they have already warned is overheating.
Among otheritems seeing increases, Housing, new cars, airline tickets, medical care, prescription drugs, add food and gasoline and you have just about everything we use while real wages are falling.
It will be hard for the F_E_D to justify not raising rates sooner although they may not do it at this meeting, they certainly have to be worried.
I believe this is likely the reason we are seeing renewed interest in gold, a natural hedge against inflation.
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