Inflation numbers were within expectations, yet this is not something to celebrate. Core inflation is still above the 2% target, and headline inflation is still above 3%. Has the Fed been successful with its policy? The answer is no. However, the current inflation numbers suggest that no action will be taken at the September FOMC meeting. Policy changes are unlikely before an election, and that will take us to the end of the year to see any policy rate change.
The important monetary policy information will come from the Jackson Hole conference and any headway from the five task forces reviewing policy. Chairman Warsh, if current behavior is a guide, is unlikely to tip his hand about policy at the Kansas City Fed confab, so the market will have to make decisions for itself on the direction of rates.
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