The Fed seems to view that it has turned the corner on inflation, yet we are still above target. The PCE inflation has been rising for the last three months and is above 2.5%. The CPI has also been rising for the last 3 months with the current number at 2.9%. The problem has not been solved, and we see to be in a sticky period of inflation above target. It appears as though September was an outlier, and the Fed made a mistake at cutting 50 bps in September.
A recent survey looked at how consumer think about inflation and there seems to be strong opinions on the negative aspects of inflation. See "Why Do We Dislike Inflation?". Consumer clearly believe that it diminishes purchasing power and wages do not seem to match the increases in inflation. Hence, there must be costly adjustments to budgets and behavior especially for low-income groups. Inflation hurts financial assets and reduces savings and there is little trust that wages will keep up with the price changes. The anger about inflation is directed both at government and business with the government being over 3 times more likely where the anger is placed. Consumers also think that inflation hurst our international reputation, decreases political stability, and decreases social cohesion. This is some very interesting food for thought and suggests that the Fed and government in general should more closely listen to consumer views.
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