The 6-month core services PCE inflation index, accelerating since August, hit 3.7% annualized. Chip prices and software wreak havoc amid consumer electronics.
By Wolf Richter for WOLF STREET.
The PCE price index, which the Fed favors for its inflation yardstick, spiked by 0.66% in March from February (+8.3% annualized), the worst spike since mid-2022 at the peak of the inflation surge.
Inflation has been accelerating since mid-2025. In each of the three months of December, January, and February – so before the war and before the energy price spike – the PCE price index had already surged by 4% to 4.6% annualized (black circle in the chart). The March spike is on top of that acceleration (blue line). And it was energy, but not just energy.
Year-over-year, the PCE price index jumped by 3.5%, the worst since May 2023 (red line). The Fed’s target for the year-over-year measure is 2.0%, and PCE inflation has been moving away from it relentlessly for the past 10 months, and the energy price spike came on top of it.
The energy PCE price index exploded by a historic 11.6% in March from February (+272% annualized).
March pushed the year-over-year increase to +14.4%, from a negative reading in February. This is what a price shock looks like.
Note that the US is the largest crude oil and petroleum products producer in the world, a large exporter of crude oil and petroleum products, including gasoline and diesel, and gets very little crude oil from the Strait of Hormuz. The gasoline whose prices spiked in March had already been in tanks at gas stations or at refineries or in transit, purchased at the low February-and-before prices, and that price spike went straight to profit margins of oil companies, refiners, and gasoline retailers.
It was not just energy.
Core services, which account for about 60% of the PCE price index, jumped by 0.32% in March from February (+3.9% annualized).
The six-month core services index has been accelerating since August. In March, it jumped by 3.7% annualized, the highest in a year. The six-month average shows the recent trend beyond the month-to-month squiggles.
Year-over-year, the core services index accelerated to 3.3% (not shown).
The core PCE price index, which excludes energy and food, jumped by 0.29% in March from February, or +3.6% annualized, after three months in a row of 4%+ annualized readings (blue in the chart).
This pushed up the 6-month core PCE price index to +3.7% annualized, the worst since June 2023. The six-month index reflects the more recent trend, and that trend has been going in the wrong direction.
The year-over-year core PCE price index (red in the chart) rose by 3.2%. The Fed’s target for this measure is 2.0%. And being a “core” measure, it does not include the gasoline price spike.
Durable goods prices jumped month to month by 0.42% (+5.1% annualized).
Of the major categories, many had declines or only small increases:
Declines or only tiny increases:
- Appliances: -2.3%
- Cars & trucks: +0.07%
- Motorcycles: unchanged
- Auto parts and accessories: +0.1%
- Furniture and Furnishings: -0.5%
- Video & audio equipment: -0.02%
- Sporting equipment, supplies, guns, ammo: -0.2%
- Books: -0.4%
- Phone & related communication equipment: -0.8%
But some had huge increases, such as computers due to spiking chip prices due to the AI investment bubble; software subscriptions that got jacked up; and jewelry as jewelers passed on much higher gold prices.
Large increases:
- Glassware, tableware: +0.5%
- Tools and equipment for house & garden: +1.2%
- PCs, laptops, tablets, driven by the surge in chip prices (see AI): +1.5%
- Computer software & accessories (jacked up subscriptions): +4.0%
- Pleasure boats & aircraft: +0.4%
- Jewelry, passing on the much higher gold prices: +1.2%
- Musical instruments: +1.4%
- Bicycles & accessories: +0.4%
Food prices dipped by 0.1% in March from February (-1.7% annualized), after three months in a row of substantial increases (blue)
Year-over-year, the index decelerated to +1.7% (red).
Inflation in the entire US economy is rocking and rolling.
The above measures are tracking consumer price inflation; inflation in goods and services that consumers are paying for. But businesses and governments also face inflation for the goods and services they purchase.
The inflation measure that tracks inflation in the overall US economy for consumers, businesses, and governments is the GDP “Implicit Price Deflator,” also released today by the Bureau of Economic Analysis as part of the Q1 GDP data.
This overall inflation rate has been running hotter than consumer price inflation: In Q1, it increased by 3.6% annual rate, after increasing by 3.7% annual rate each in Q3 and Q4 (blue line).
This is a quarterly measure, and so the energy price spike in March was counterbalanced by the plunge in January and the smaller increase in February .
Year-over-year, inflation in the overall economy in Q1 of 3.3% matched inflation in Q4.
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Media hails Jerome Powell as a hero for supposedly standing up to Donald Trump, a flattering myth that won’t age well.
In reality, he is on track to go down as the worst chairman in Fed history: the man who destroyed price stability, stripped American workers of roughly 40% of their purchasing power in just five years, and inflated asset prices to the point that housing is now out of reach for anyone but the wealthy. All of it fueled by a balance sheet ballooned to $8 trillion, complete with legally dubious forays into junk bond buying.
His epitaph practically writes itself: “inflation is transitory.”
Had the Fed stuck to its mandate and delivered price stability, it wouldn’t be politicized today. Instead, Powell seemed intent on dragging it into mission creep climate policy as well.
The result is outright failure, an incompetent stewardship that will be remembered for damage it left behind.
Powell: Inflation is transitory.
Inflation: Powell is transitory.
Who will have the last laugh?
so even before the IRAN conflict
the exponential debt by grifters in CONgress
was rearing its ugly head, just like the
Inflation Production Act did under biden(double prices)
estimates that if just the grifting was stopped
the budget would be balanced
ie Living within ones means
Agree. The asset bubble Powell helped inflate with mega QE is too insidious and damaging to be justified or forgiven.
No mention of the massive US deficit. Hard to take this post seriously.
Chicken and egg. If Congress had borrowed $5 trillion from March 2020 through March 2021 without that QE, rates would have blown out, and MAYBE imposed some discipline on Congress.
The Fed’s job is not to enable reckless spending by Congress.
There is a book written by a Wall Street journal journalist who was “recording history” as it were during the pandemic.
It almost shows every step Powell made and why he made them.
He had the backing of some really smart economists. Think Yellen was in some of it, she’s really smart.
Covid was ugly, there were no good ways out. They do the best they can at the time.
Make the moves, take the notes, and next time we’ll all do better.
I mean when everyone were children, do we all grow up blaming the parents like some sort of Monday morning quarterback. Nope, now you’re an adult and you make the decisions. Steer the ship Captain Ron.
Yep. Easy to judge with the benefit of hindsight and complete disregard for the things that might have happened has different choices been made.
sufferinsucatash, I don’t agree with you. These weren’t things that were mistakes in retrospect. They were very obvious they were mistakes at the time they were being made, and many, many smart people said so.
And then once things settled down and they were shown to be mistakes, they doubled down on stupid.
Sounds much like the decisions of this administration….
Tsonder
I think maybe you’re not understanding how it could have been a lot worse, very easily.
Could have been another Great Depression, perhaps if someone with less knowledge or ability or even who sits on their hands cuz they don’t want to be blamed.
Then we’re all in line for food and not debating semantics in a cushy Internet forum.
“No mention of the massive US deficit. Hard to take this post seriously.”
So over in the articles on this site that cover us the US deficit and debt out the wazoo in great detail are we going to find a comment from you that says: “No mention of acceleration in the PCE price index. Hard to take this post seriously.”?
Sometimes I wish this site had a mute button. Like NextDoor.
For clarity, I was speaking about OldTimer’s comment/post, not the article by Wolf. I know he covers the US debt/deficit in depth.
1. This is an inflation article not a government fiscal deficit and debt article.
2. here are the deficit and debt articles.
https://wolfstreet.com/category/all/debtor-nation/
3. Earlier today, the GDP article (Thursday morning) also included the debt-to-GDP chart. But that stuff doesn’t belong into an inflation article.
Even if his post is overstated, Powell was objectively a terrible Fed chair. And yes his DID have a major inflationary impact – that doesn’t mean the deficit isn’t also part of it. It doesn’t have to be either or.
Should read “his policies did have an inflationary impact”
It wouldn’t be politicized??? Yu mean the Jerome Powell President Donald J Trump nominated to the chair??? LMFAO
And we now have Trump nominees in all corners of the government, with the consequences just starting to be felt. RFK jr. is bringing measles back, schools are closing, government officials are using gambling platforms to gamble on their own decisions, and the SEC, FBI, etc. are utterly neutralized.
“RFK jr. is bringing measles back,”
Too late. That movement started years ago when all the anti-vaxxer stuff started. The measles outbreak in Texas, a result of years of anti-vaxxer stuff, started in January 2025 before RFK took over the office. To blame RFK for the measles outbreak is just BS. You can blame RFK for his current rhetoric, but not for the measles outbreak.
This actually a reply to wolf. I don’t expect you to be an expert of rfk jr and his anti vax past, but many consider his actions directly responsible for a major outbreak in Samoa. He was hired to do the hhs job specifically because of his deadly attitude toward vaccines. His claims are thoroughly debunked and his actions and advocacy are directly linked to a lot of deaths. It would take the barest amount of effort to see numerous medical publications about this, and the outcry against him from long before his nomination. So while it might be true to say that this antivax halfwittery comes from before he was hhs secretary, It’s false to say he is not a major cause of it. Back to finance.
Too late: Letting millions of unvaccinated illegal aliens without documents and schools waiving its vaccinations requirements for illegals enrolling children had a larger impact. My daughter’s school regularly sends emails notifying new disease outbreaks—4 so far this school year. U.S. citizens had to show multiple documents proving vaccinations to enroll.
“…housing is now out of reach for anyone but the wealthy.” I’m going to channel my inner Wolf here, this is total BS.
A family member of ours just bought their first home. Their household income is about $60K and were able to purchase a home with an FHA loan putting down 3.5%. The home is 3 BR, 2 Bath, single attached garage. It cost $140K.
But…but…but…housing is unaffordable!!!!
But…but…but…the boomers took our wealth!!!!
But…but…but…the millennials are outbidding each other!!!!!!
But…but…but….private equity owns all the homes in America!!!!!
Come on, open your eyes.
I wonder where ?
IN my city, median household income is 90K but median home price is almost 900K.
The home prices almost double in last 5 years ( 80% or so, if not 100% up ).
The wages just didn’t keep up.
Jerome Powell has locked out a whole generation of Americans of homes to live in.
People would not ever forgive this. There was no need to keep buying MBS when the housing market was on fire.
205 Sassafrass St, Coloma, MI 49038
791 McAllister Ave, Benton Harbor, MI 49022
San Antonio, Texas.
where i live my friend sold mobile house 3 bdr.2 bathroom 1300sqf for $395k .and rent lease there is $800 a month.
i dont know where you can buy house for 140k.not a lot of places in us
$140K for a house?
Is it above a bowling alley and below another bowling alley?
You can get a very nice home on 5 acres for $140k in many low-cost states. One quick search on Zillow proves this. Any couple working at the local Walmart can afford this. All the snobs that are too good to live in these beautiful flyover cities with populations of 40k to 100k deserve every bit of misery that they spend on the internet constantly whining about.
So from the moment they sign the papers and transfer the money, they’re underwater. Not by a little, but a by a whole ocean of debt. They are now chained to this house forever and are one lost job away from losing everything.
… congratulations?
As a “responsible” family member that reads Wolf Street you just stood by and let this happen?
Since you have absolutely no idea what their complete financial situation is, you have no grounds for making such a harsh comment.
For instance, if they “lost a job”, what makes you assume they would lose the house? They could most likely move back in with parents and rent the house, and probably come out even.
Statistically, the odds are good that a parent or grandparent could simply pay off that mortgage, if they chose to, but are letting the grandkids grow up properly by learning from experience.
For that matter, there are probably folks right here on WolfStree who could pony up $130K as co-investors, if needed to help those kids out, just for the laughs!
How are they underwater? How are they stuck in the house forever?
Maybe the house was bought at a discount so they are above water. Plus they can always sell the house at a slight loss and get out from it.
Plus, they have to live somewhere. If the mortgage is near the equivalent rent, they can ride out the frozen market.
Don’t get me wrong, there are some serious problems in the housing market. I would even say it is broken. But that doesn’t warrant making the stupid comment of ” As a “responsible” family member that reads Wolf Street you just stood by and let this happen?” to anyone who knows someone who buys a house.
Just because buying a house is tough in this market doesn’t mean every purchase of a house is stupid.
What is stupid is ideology and ignorance of nuance.
Cherry-picking BS, Nunya. The housing market is broken, and everybody knows it.
Nunya makes the valid point that the housing market isn’t broken everywhere.
Particularly for people who are adaptable and willing to move to more affordable communities.
Isn’t that what “gentrification” means, with respect to formerly run-down inner cities? But now it’s not just cities, it’s more of a national thing.
Not cherry picking. Doesn’t anybody pay attention? As stated above and as stated elsewhere on this site, each market dances to its own beat. The problem is most people focus on the hottest markets, and then apply that to everything.
I have friends in NYC who refuse to leave NYC, and it is almost impossible for them to buy. So they continue to rent. For them, at the moment, it is cheaper to rent. It won’t always be that way.
In about 5 minutes searching online, I can find affordable housing for pretty much any budget in the US. The problem is people have too many check boxes and want it all.
I travel for work all over the country for construction. I see the good, the bad, the ugly, and everything in between. Coast to coast, border towns, desert towns, remote mountain towns. The US is GINORMOUS, and it has lots of very nice places to live in.
Nunya:
I definitely agree.
Not to in any way downplay the problems that definitely need fixn’…
inflation sucks for everyone, especially those with less money.
But there are still opportunities out there for the “average American”
It might not be the house or job you want, but the “average person” can bust their ass, learn, and change their situation.
And before I take a beating for this comment…
I am an average blue collar working American” that is busting his ass to make it work, and live what I believe is a very comfortable life style.
There are still opportunities, you just gotta find them and more importantly work for them.
Also, I realize there are exceptions, which is why I said “average American”
Too many people sit on their couch wasting thousands of hrs. being jealous of what others have, not realizing those thousands of hrs could be used to change their own situation.
It ballooned to almost $9 trillion before he started QT.
I agree with you. No matter what the “unknowns” of COVID in early 2020, printing $3 trillion in 3 months was inexcusable. As was continuing to print for 16 months after it was clear the economy was overheated.
Powell is both ignorant and arrogant. Powell obviously can’t read the tea leaves. He never learned what the Greenspan put was all about. He never remembered that Bernanke said about stoking asset prices.
Let’s remember that Jerome Powell is only one vote on the Federal Reserve Board.
Ben Bernanke testified before Congress in 2007 that the impact of subprime defaults would be contained and would not cause a recession.
The S&P 500 fell more than 55% from it’s high to its low in 2009.
Look up stock s&p Apple inc Christopher Thomas
Well, the same policy landed Bernanke “Time’s Man of the Year” honors, and Janet Yellen just kept rolling with it. Powell at least tried to end it, and then dove back in when covid arrived, before reversing course again. So it’s more like a succession of damage. I think Powell knows what’s right but lacked the spine of Volcker.
Trump is going to go down in history as the idiot who appointed him while also doing everything to burn down the economy while stealing as much as him and his family can.
This war with Iran is a baked in recession likely global depression. $4 gas is the beginning and $6 gas is the end point. There is a massive droughts in the US, fertilizer is so high a lot of farmers just aren’t using it. 2022 inflation spikes happended because of minor trade disruptions from covid policies of other countries. This is an order of magnitude worse.
The AI bubble is 90% of the growth and is about to pop, taking most PE firms down, crashing the market and retirement income from boomers who rely on an ever increasing market. Unemployment is artifically low due to door dash and uber. Both of which rely on low gas prices snd low food prices.
Restaurants can’t hand another 20% to 50% in costs. But drought and high food prices due to lack of fertilizer is going to add up. It takes longer to open a business then to close one.
Then we can’t really grow by selling exports. Cars? Electric cars are cheap and now with high oil prices, they look even cheaper. Raw materials and insurance monopolies keep us from building anything at a cheap price. Even Apple is starting to lose to Huawei phones that offer 90% of the performance for 50% of the price. We need to break up monopolies and become communist like China. Natural monoplies need to be run for the best of the country, not the shareholders.
We need to ban buybacks and make it difficult to make money in the stock market. China does it and the only way to become wealthy is by making a business with actual products. The wealthiest man in China owns TikTok. The wealthiest man in the US own a an unprofitable social media company that bought debt in the AI company owned by the same guy who’s try to sell it to himself via a rocket company that wasn’t vefy profitable so became an unprofitable telecom company that buys cars from his unprofitable car company that can’t compete outside of California.
The second wealthiest in china own a pharma company and a bottled water company. The Second wealthiest in the US is a guy who has a tech monopoly but now his in deep debt on unprofitable AI that burns so much cash that they refuse to tell people that just making an AI dog video likely costs them $10-$15 per video. Anthropic had said every customer uses $8 for every $1 of subscription. Even that’s not true because new models are somehow more expensive to use.
The entire economy is going to collapse in a vedy painful recession because the rentier class wants to earn money by never actually competing for it
Almost everything you said is wrong, or incorrectly attributed, faulty causal chains, incorrect timing, or faulty conclusions. Your massive ignorance would be astounding…but that’s what a lifetime of being tought by communists that run our schools. Throwing in actual facts like the price of gas, or elons company shell games makes you feel like you’ve properly portrayed a picture when none of it was properly saying anything. It was just ranting using words and situations you don’t understand.
1) Do you think fiscal policy has nothing to do with inflation? It was the congress critters who decided to run the last 5 years with deficits in the range of 6% of GDP. They printed money to make that happen, and inflationary pressures are the outcome of that behavior. JPow did not send you stimulus checks amid supply shortages, or write hundreds of billions in PPP loans, many to fake companies. Your Congress and two presidents did that.
2) Exactly what policies could JPow have implemented that would have accomplished the following objectives:
> turning COVID into a minor two month recession,
> turning around the brief 2021 inflation into a nothingburger within a year
> maintaining the value of the US dollar, at least until fiscal policy went crazy in 2025
> maintaining near full employment for almost his entire term, except for a year around the worst pandemic since 1918
Monday morning quarterbacks can say rates should have been higher, but those same people would be complaining the loudest about the 7% unemployment rate, the asset price collapse, and the recession.
3) Did the FOMC reach or maintain its 2% target during the past 5 years? No. But compared to an alternative universe where rates were 2% higher the entire time, we can see that was an engineering tradeoff which saved countless millions of jobs and prevented a recession in 2022-2023. The FOMC accepted slippage of the inflation mandate to keep you at work, and people hate them for it. Justify the opposite call.
4) Like the rent, asset prices are too damn high. But is that the Fed’s fault or is it a consequence of government subsidies for Fannie and Freddy, semiconductor producers and other manufacturers, farm welfare, government taking equity stakes in more and more companies, tax cuts to near nothing, financial deregulation and the shadow banking system, or financial innovations allowing for less friction in the trading of assets and more opportunities to hedge? With regard to stocks and bonds, might the increase in S&P500 margins over the past 3 decades have anything to do with it?
You are rationalizing. The Feds main job is to tackle inflation. It failed miserably the past five years.
No excuses please.
The Fed has a dual mandate- inflation and employment. So many on here seem to wish the Powell Fed had crushed inflation by killing the economy to get 10.2% unemployment as happened in 1982 to crush that inflation. I don’t think that would have been a good idea. The US economy post-COVD, though flawed, has stayed stable and we don’t have bread lines as happened in 1982 with mass layoffs.
Is this a troll post?
Oldtimer …..
+ 1000 %
Powell was even worse the Carter’s Fed Chief, Miller, who’s total financial experience was managing golf carts at his local Country Club. Miller was fired in 1979 by Carter and replaced by Volcker who set the country on the right course and pushed up the prime interest rate to 21%. We need Walsh to show some guts and do the same. We also need to get rid of Powell after Walsh takes over. If Powell doesn’t leave he should be fired for cause. His 5 billion cost overrun he oversaw is plenty of ammunition. Good riddance.
So when can I expect rate cuts?
Howdy Gomer. SHAME SHAME SHAME. But could the FED really be that stupid??? You bet it can…
Who wants the DOJ up in their business? I don’t know about cuts but CPI will probably need to explode before they’ll dare to raise.
I agree that the next FED action is just as likely to be an qtr pt increase in short term money mkt rate as a cut as inflation rages
Well what can the Americans that dont have health insurance
Continue too pay for free health care for a foreign country
Isnt that the definition of treason
Exactly. Fed will do opposite of what is correct based on past performance
I’m not sure how this works, but it’s a problem…
While a lot of AI data centers are not even close to done on any level, I’m surprised some are not using inflation as a reason to cut back on those investments. I suppose it is all part of all of this being transitory and that AI will live up to the hype or something like that. I’m by no means anti AI but it is no way what it is sold to be and I would think capex and lack of revenue might catch up. At least in the early days of Lyft and Uber there was light at the end of the tunnel for cash burn. Doesn’t help AI is funding a lot of the build out with debt.
I think it’s more an example of the phenomenon that people would rather be really wrong with everyone else than a little bit wrong by themselves. If they jump on the AI train, even if it’s a bubble that bursts massively, they can say “Hey, everyone else was doing it!”
One theory is AI is being heavily invested in and marketed to help the software industries which have been flat or in decline. Of you bolt on AI you can increase subscriptions. Or you have companies like Oracle who has been flat and my guess AI will not benefit them and will struggle under massive debt for some time. Should have stuck with their strength but stockholders want endless growth.
Yep that seems to be why the big tech CEOs are jumping in. You’ll notice that many of their data centers are being built with 3rd parties that they only have to pay IF the data center gets completed. So it’s like a data center “option”. So they’re talking the hype but can walk away without imploding when the bubble bursts, unlike the data center companies.
The Fed’s infamous “Symmetric 2% Inflation Target” is proving correct!
Looking at Wolf’s graphs…
Inflation was below 2% from 2008-2021.
Inflation is above 2% since 2021.
So inflation IS symmetric about 2% … like a sine wave centered on 2021…
Powell’s NADIR: Not A Doubt: Inflation’s Reignited!
I ve heard the argument that because inflation was below 2% for several years the OVER IS OKAY…it balances.
But wasnt 2% proposed as the Ceiling?…..and now its the Floor. 5 years over is not a victory over inflation….it can be argued it is a victory FOR INFLATION.
Is it not true the 3% of an ever increasing index is an increasingly larger number?
And now PCE is over the Fed Funds target range….
Powell was a failure…..but at least he wasnt Trump’s stooge.
Upon further inspection: Inflation no longer “balances around 2%”.
The average inflation over the past 30 years (since 1996) is 2.06%.
The average inflation over the past 20 years is 2.22%.
The average inflation over the past 10 years is 2.79%.
In fact there is no number of years, looking back from today to any point in the past 67 years, where the average inflation rate was 2% or less!
Verified using the Core PCE inflation series in FRED.stlouisfed.gov
By my estimation, Core PCE plane has never landed on 2% since the “transitory” inflation reared it’s ugly head. Appears to be reaccelerating going into the summber vs April ’25. Still waiting for high prices to solve high prices.
Glad I got into TIPS. Just gotta bail out in time, which will be tricky.
By tying any potential future tightening to market-based inflation expectations (and not realized inflation) Powell gave Wall Street institutions a metric they could easily game.
If you’re Goldman Sachs, you’d rather take a small loss on TIPS to keep expectations “well anchored,” while artificially loose monetary policy drives 30% annual gains in their equities investments.
But the Fed isn’t doing that. They’re looking actual inflation rates. And to see where they might be going in the future, they’re also looking at all kinds of other stuff, such as inflation expectations in various forms. But the primary focus are the actual inflation rates.
Wolf, ignoring the questionable legality of their “2% inflation target” that the FED instituted sometime around 2014 (it should be 0% like it always had been), the FED has been above this 2% target for over 5 years straight, never having hit it. Isn’t it safe to say the FED is totally full of shit and not actually trying to stop inflation, instead actively attempting to promote it? Because Bernanke is even on record saying “we could stop inflation in 15 minutes if we wanted to.”
A charitable explanation is that they were trying not to over-correct and push the economy into recession. This is something that has happened before, and people always criticized them harshly for over-correcting.
At the beginning of last fall’s rate cuts, Core PCE had been plummeting for months. JPow gave about 6 months notice that they wouldn’t wait until it fell all the way to 2% (while leaving the FFR near 5% until then). Had that happened, they’d have a highly restrictive policy in place that would push the economy into recession. So they didn’t do that.
Today’s FFR is about neutral, but we’re finally seeing the inflationary effects of tariffs, a labor shortage, and a weak dollar.
The Fed has been very clear that it doesn’t want to “stop” inflation. It wants moderate inflation that people don’t feel too much and that doesn’t change behavior. That goal was 2% PCE. Now, as the fiscal situation has deteriorated so much, it looks like they’re happy with 3% PCE, or a little higher, because it will make the fiscal mess easier to deal with. They absolutely do not want to trigger a recession and an unemployment crisis because that would blow the fiscal mess out the wazoo (sorry).
Yes. The entire Fed board, not just Powell, and of course Congress, has been terrible, enabling the huge mess of housing, debt, and inflation. The American people could abolish the Fed in a short time, if they were more aware, but most Americans know little to nothing about the country’s fiscal situation, or third political parties. Can’t blame the young folks. I didn’t learn about it until in my 40s.
What happened? Everything was great at the FOMC conference, literally, yesterday.
No it wasn’t. Inflation was a huge concern, both in the statement and in Powell’s press conference.
Yeah Gary.
Cmon!
Jk haha
/s
Guy in a $30,000 suit, cmon! – GoB in Arrested Development
40 Trillion in debt and accelerating.
Nobody seriously believes this will ever be paid back by increasing revenues or reducing spending. Both approaches look to political non-starters.
Since there is no other alternatives, (bondholders beware) this debt will simply be inflated away. Better buy your hard assets while you still can, after all, that’s how the wealthy are going to ride this out.
Isn’t the spending outpacing the inflating?
This tactic won’t work, unless you are cool going the route of Venezuela
makruger
“Nobody seriously believes this will ever be paid back”
It doesn’t need to be “paid back.” It shouldn’t be paid back. No one ever planned to pay it back. No one ever expected it to be paid back.
There are only two types of capital:
1. equity capital
2. debt capital.
Equity capital is permanent. You never get your money back. You have to sell the paper for whatever you can get enough for it, which is sometimes nothing and sometimes a lot.
Debt capital has a maturity date, and on that date the debt will be redeemed at face value, and you get your money back. Meanwhile, new debt was issued to so that you can get your money back, so it’s like equity capital, but periodically, you get your money back. Plus you get paid the interest. You can also sell the debt to someone else. Treasury market is huge.
The thing with debt capital is the interest expense. When there is too much debt, it gets hard to pay for the interest, and then things can get more complicated.
grimp,
Keep your eyes on the Debt to GDP ratio and the interest-payments-to-tax-receipts ratio:
https://wolfstreet.com/2026/04/30/without-government-spending-trade-gdp-rose-by-2-5-in-q1-boosted-by-ai-investments/
https://wolfstreet.com/2026/04/09/us-government-interest-payments-tax-receipts-average-interest-rate-on-the-debt-and-debt-to-gdp-ratio-in-q4-2025/
Not to pick nits, but most forms of equity capital do pay dividends (stocks) or rental income (real estate).
Those income yields historically were much higher than today.
So equity investors did “get their money back” without having to sell the equity.
(Also worth a note – stocks not currently paying dividends will often start paying them in the future, as their business matures… if they survive.)
A return “on” your investment is NOT a return “of” your investment. Those two are separate for both equity and debt capital. Equity investors do NOT get their money back by collecting rents or dividends – that’s the return on the investment, same as debt investors getting interest. But at the end, debt matures, and equity doesn’t mature. So if you want to cash out your rental, you have to sell it; if you want to cash out your debt, you hold it to maturity, and then you get paid face value by the issuer.
You can ignore reality but not the consequences of ignoring reality…
…there are almost 9 billion souls on this rock, that’s a lot of demand for all the things that are required for a decent standard of living. Tell me, what’s the “price” of something that no one is willing to sell to that is unavailable?
Hedge accordingly.
Haha..one article is “ Inflation in the Entire US economy Is Rocking and Rolling” and the previous one says GDP is up 2.5.
Maybe the 2.5% GDP increase is that rocking and rolling inflation. Wheels spinning, round and round, not really going anywhere. But it sounds nice (2.5% increase).
Let’s ask Bozo the Clown what the inflation rate is.
RTGDFA. 2.5% GDP growth is adjusted for this big inflation metric, 3.7%, see last chart in this article here. RTGDFA Google RTGDFA if you don’t know what that means.
Not adjusted for inflation, GDP growth was 5.6%, third chart in the GDP article. RTGDFA. This shit is just exasperating.
Those Asian refineries which supply California with significant amounts of refined fuel get their crude thru the Hormuz straits. Last tankers pre Iran war are docking in California right now. Very little in the pipeline for May onwards. Anyone have thoughts about the likely impact to California, Nevada, Arizona and the U.S. as a whole real shortages of Fuel?
LNG pipeline from Texas to AZ is gaining some steam. In 2005, Yuma was about to build a refinery but was stopped. Now AZ needs to deal with water because CA continues to dump water out to the ocean.
My opinion is AZ goes back to the table about the water cuts, refuses to, and shuts off all electricity to CA. That is unless the FED gets involved and poses injunctions on CA for shutting business to the state down. I mean it is as you pointed out issues for all south western states.
AZ also discovered their air quality is poor due to geography. Mexico and the jet stream are more involved than AZ.
Other tankers will find their way to California.
There will be a price premium to get them to come.
California could cut their gas taxes (as other nations and states have done) to balance things out.
Come on, this isn’t hard, it’s basic supply and demand, and politics.
California refineries need to first stop EXPORTING gasoline, diesel, and jet fuel to Mexico and other countries south of here. He see the full tankers go out all the time — now less so than before.
Gasoline consumption in CA started collapsing years ago due to more fuel efficient hybrids and of course EVs. Both of them are all over the place. Plus some pretty decent mass-transit in the big cities.
That decline in consumption is why refiners started exporting. They import crude and export value-added product. it’s a huge business. I discussed this quite a bit here.
There will be no “shortage”. Only higher, and higher, and higher prices.
Oil products and their derivatives are globally traded. California is on the water and Trump has suspended the Jones Act. There can be short term arbs, but the generally closer relatively quickly.
Texas refineries are paying global crude prices because that’s how global commodity markets work
We’re sitting on 210k of I-bonds since 2020 because I didn’t buy the transitory line then, nor do I now.
Can’t say they’ve done much better than any other treasury asset over that time span, but they haven’t done worse either. At least tax wise they are helping. . .for now.
I was going to roll some of the early ones with a 0% fixed rate this year, but now that inflation is raising I just added to it I guess.
What a dumb investment product, lol. You get to feel screwed no matter what inflation does.
Should have bought the S&P while the balance sheet was exploding higher.
I-bonds looked interesting in 2020, but I also concluded that they are not a good choice, unless the fixed-rate coupon is much higher.
With a low coupon, your return from the I-bond gets destroyed by taxes, unless the bond can be used to pay for college… and there’s an income test for that too.
The current I-Bond rate is only 0.9% (plus inflation, minus taxes).
Many people would do better with TIPS:
5-year is 1.3% plus inflation
10 year is 1.92% plus inflation
30 year is 2.68% plus inflation.
TIPS yields above 2.5% are historically rare.
make sure you understand the nasty tax consequences of TIPS. We hold them only in tax-deferred accounts to avoid those consequences.
How did you accumulate that much in i-bonds? The annual maximum you can buy per individual per year is $10,000, so if you accumulated $210k in six years I guess “we’re” means at least 4 people. Unless there’s some loophole I’m unaware of?
10k limit for an individual, me and wife, I plus business entity for 30k a year.
Think Jerome slipped on a banana peel on the way out.
🍌
He crashed into some buckets holding the inflation back.
🤣
Once the Iran war has been resolved, energy costs will go down again, and inflation will calm. I think we need to be grateful to have an intelligent and forceful leader like President Trump to guide the nation in these uncertain times.
Fat chance bub.
1. There’s severe damage to installations in multiple gulf countries
2. The shipping insurance fees will not come down due to vastly increased uncertainty, part of that is from state actors feeling freedom to blockade sea-lanes and even board and seize ships at high-sea.
3. Short & mid-term there’s a shipping disruption that will take some months to smooth out
4. Ukraine is bombing the everloving shit out of Russian refineries in the past months, permanently lowering outputs for years to come. This largely goes unnoticed in the west due to sanctions, but it drives up global prices
5. Oil supply shock inflation will move as a wave through industries and supply lines, starting with industries with direct dependency on petro and imported goods from Asia, but all of that filters down into wider economic inflation.
6. Fed under current administration wants inflation because they continue banking on the hegemony of the dollar to keep their spending up. So I wouldn’t count on an astute response or increase of rates to try to put a lid on inflation. That’s especially worrysome because inflation tends to create negative spirals (wage / price) that are tough to tackle once you’re in deep.
Unless I totally missed your sarcasm, I’d recommend reading some other comments here with sensible advice on how to hedge against long term and high inflation.
Of course if our intelligent and forceful leader had not attacked Iran in the first place creating these uncertain times, energy prices wouldn’t have gone up in the first place.
LOL! Excellent sarcasm.
The best part is how subtle it is. There are some people who just almost actually talk that way.
It is the Onion Humor Paradox.
No matter how absurd The Onion tried to make their satirical stories, it couldn’t beat the absurd reality of how CERTAIN people thought.
Energy can come down, but even then, services inflation has been an issue for a long time. Long before the Iran conflict.
Rate of change charts are interesting and pertinent…..but
A chart of an inflation index, with all the accumulated additions, would be shocking. And it certainly is NOT on a 2% trajectory.
Powell was a failure
1. Inflation is a rate of change of prices in a defined time period. High prices are high prices, and if they don’t change but stay high, it’s not inflation, but just high prices.
2. To see my price level charts, not percent-change charts, you have to go to my CPI articles — and yes, they’re shocking. Here are some recent examples:
https://wolfstreet.com/2026/04/14/car-truck-inflation-in-america-cost-of-vehicle-ownership-soared-by-36-since-2020/
https://wolfstreet.com/2026/03/12/energy-inflation-for-americans/
https://wolfstreet.com/2026/03/11/food-inflation-in-america/
I always find it strange that people anchor on prices they paid at some point in their life, but do not anchor on the salary they were paid at the same point in their life.
Yeah… I just had that conversation with my cousin today. He is a real estate appraiser and my Dad has a habit of driving around and looking at different large homes he passed on buying in the 1960’s and will say “I could have bought that for $20,000 (or whatever) back in 196x.”
I always have to remind Dad of how little he was making each year in 196x. For example, it took him 39 years working the same exact job for the government from 1971 onwards to reach six figures.
Those low house prices he remanences over weren’t the result of them being good deals back in the 1960s…. it was the result of a dollar having a helluva lot more purchasing power back then than it does now.
Going to get interesting as more tankers fill up at the gulf coast and the ability to be a big exporter of oil and refined products starts showing up as a double edged sword. The parts of the world saying they don’t care what the price is, they just need the tanker filled will all be lining up. Inflation reads over the summer driving season will likely become very politically motivating
Yep, and just like 1973, it’s about to get a lot worse. However, unlike the 70’s out debt/GPD is now over 220%. Jump you f%#$ers!
Hedge accordingly.
I get the oil and gas industry profits from higher prices as long as there’s no demand destruction, but unless you’re invested in that industry, the effects on inflation don’t help the average consumer. With the AI build out, energy consumption is going up, the effects of higher oil prices will keep growing even even if the Strait of Hormuz opens up today.
I feel like the “soft landing” approach is going to have been just delaying a reckoning. Possibly even making it worse. Maybe they cut too soon. :/
^^^This
They know what they did, but they’re terrified to let the bubble deflate so instead they keep propping it up.
What they’re also not understanding dropping rates won’t prop up the economy anymore. I feel like it’s less likely to spur hiring, that instead it will spur even more investment in AI and robotics to replace workers.
I feel like the problem is that they haven’t really been doing a “soft landing”. They have been doing a “super soft, feather light, pile the pillows up, don’t wake the baby, heaven forbid anyone feels any bump whatsoever” type of landing.
I think it is totally unrealistic and it is allowing inflation to persist (or even run hot).
I get trying for the soft landing, but the plane has to actually touch the ground to land
More like a midair refueling than any type of landing
Our national debt is so large I think they want inflation….
They’ll say they don’t want it, but my guess is they’d prefer to run between 3-4%. Albiet maybe they’ll pick a different metric or throw some estimates in to try to convince the general public it’s bad. Inflation is bad for politics but otherwise they don’t care
Bond market reactions to the inflation and poor fiscal management have been minimal. I mean we had inflation of 7% and long term rates stayed below 5%.
True, although higher inflation has consequences for the government as well such as COLA’s for social security(assuming they don’t “fudge” the numbers to keep them lower), although I suppose that is small by comparison but also immediate. Guessing it hits other areas too. Will be interesting what that comes in at in October as a lot of open variables right now.
That’s what I meant with by play with the numbers via estimates like they did with health or like Warsh was proposing a new inflation metric be used. I doubt what actual inflation is will be transferred on to COLA adjustments.
I mean I have a hard time believing the ~3% number as literally everything I buy seems to be more expensive, or shrinking in size, or declining in quality. Specifically in food what I’m now noticing is swapping for low quality ingredients – wanted to make chicken pesto and grabbed my favorite jar of pesto, looking at the ingredients list they swapped the olive oil for seed oil recently. I then had to buy a significantly more expensive jar. Sure I could have bought the cheaper seed oil one, but my point is to maintain the same quality of life just keeps getting more and more expensive
There are all kinds of food that I don’t buy anymore because it’s not worth it, or I only buy when it’s on sale at pre-covid prices. I think the most annoying instance of food inflation is the thing with potato chips, where you’re paying $6 for a Lays party balloon with two or three chips in it. I mean, how is it that expensive to make chips? It’s like we’re living through a first-world version of the Irish potato famine. And now I can’t even put helium in my stupid chip-balloon because the war has jacked up the price of that too!
*convince the general public that it’s not bad
JP please come back. Send me a large energy check to prevent demand
destruction.
Kevin and Yellen hurried the raids on people bank accounts to save the banks and the plunging real estate in Oct 2008. If they didn’t it would take decades to rise from the ashes. That’s how empires break apart.
Wolf, I’d love to see your take on various historical and forward-looking inflation data.
I see multiple data sets all showing that the Fed’s “Symmetric 2% Inflation” targeting has failed to anchor inflation around 2%.
Since mid-2024, it is no longer possible to find any lookback-period where inflation averaged 2.05% and rising.
The current >3% inflation rates will drive the historical averages further up, not down.
Furthermore, the TIPS yield curve shows that expected average inflation levels over the next 5, 7, 10, 20 and 30 years are all >2% as well. The TIPS breakevens range from 2.6% to 2.2%; none are below 2%.
In short, the market has called “BS” on the Fed.
And nearly all economists understand that inflation needs to be contained, for the economy to function well. The current inflation risks making things much worse, but fixing it requires political pain. Because of that, many economists cannot speak freely due to career-risk constraints.
I think you’d do the nation a service by calling this out!
Like Yogi said: it’s Déjà vu all over again.
Are the tariff dividend checks in the mail yet?
How about a windfall oil company profit check. Remember Jimmy Carter.
Don’t know why Trump likes the fossil fuel companies so much but he has really been filling their coffers.
Doesn’t seem like inflation is draining anybody’s wallet. No evidence that we are even close to the tipping point.
In other words, these energy price spikes are in general taking place before the full effects of the Strait of Hormuz closure arrive in the US. Yikes!
And as any casual observer is aware, the US has lost control of the narrative in the Middle East. Iran and Israel are in control and the Strait will likely be closed for awhile.
One is in control of the straight and one is just in control.
Inflation is going up and up if you go by what WT is reporting but FED has easing bias in their meeting minutes!
That easing bias was hotly disputed during the meeting. There was no agreement at all.
During the Biden Administration, inflation was over 9%. Yet, I did not hear the same language, like rocking and rolling. Inflation is up for obvious reasons, but if the war raps up, then it should come back down.
You would have heard if you had you had listened: “the most reckless Fed ever” right here in 2021 and early 2022. Google it 🤣
There was a lot of screaming about that inflation right here. Did you just parachute into here without having read the inflation articles starting in early 2021, and then you dare to make such a goofball statement?
I might have to blow the dust off “the most reckless Fed ever” if they cut rates while inflation soars.
John, you must be new here. We operate in the real world. Data is data and inflation was discussed in MANY articles in 2022-2024 during Biden. But this is 2026 and we are discussing our current reality with inflation. Make sense?
Great demonstration of the “Onion Humor Paradox”.
In Europe and Asia the response to oil shock is demand destruction: WFH is back, adjust thermostat at home, malls and office buildings, close stores earlier, shop online, use the staircase instead of the elevator, spend less on sport events, casinos and restaurants, fly less…
“Pilot” gas stations ceo: across the US there is no demand destruction ex: CA and AZ. The response to an oil shock is demand destruction. Gov printing energy checks cause inflation. The insurance co closed the Hormuz strait. Not Iran nor Trump.
What is the chatter at the London pubs from the Lloyd’s Syndicates underwriters? Woocoodanoode besides the obvious marine insurance exposures that those PVT political violence and terrorism policies for risk with Middle East exposures would ever crash? Check the Insurance Insider online publication for who is loosing their keisters.
So Spirit Airlines is now dead. The government blocked that merger with JetBlue, ostensibly to protect consumers. Where is the government action to protect consumers from Meta, Microsoft and Google?
Its time for the Fed to play the
“We are data dependent”
“We will see through the data when appropriate”
Hard rail monetary policy should have rates rising now. The numbers BEFORE the war would suggest raising.
If Indonesia impose a toll on the Strait of Malacca: Singapore, China, Taiwan and Japan are gone. On Apr 13 2026 Hegseth signed a “Defense Cooperation Partnership” with Indonesia. It allows the US to use Indonesia air space.
The US dominate the Hormuz in the west and Malacca in the east. Thus,
from Alaska, Japan, Okinawa, Taiwan, Malacca Strait, India, Hormuz, the UAE. the Saudi Arabia, Jordan… can “Deny China”, but the Ayatollah think that we lost.
I am absolutely no maritime expert, but the Strait of Malacca seems like the easiest one to avoid compared to hormuz which is totally land locked
Dis-savings is adding to the pressure. The personal savings rate is currently only 3.6 percent. Powell likes it hot.
Wolf – this is off topic but if you started publishing articles on energy, their sources and costs, they might become wildly popular since it’s hard to find accurate information on the topic.
“March pushed the year-over-year increase to +14.4%, ”
I picked a bad day to stop sniffing glue. :-)
I’ve said this before and will probably again…
In 2020 lockdowns were supposed to only be 2 weeks to slow the spread. Some states morphed that into “until covid is gone” and stayed locked for almost 2 years. Some states never locked.
In response to the lockdowns. Both congress and the fed added a few trillion to the supply of money in 2020, then many more trillions in 21-23, though the fed can hamstring congress by not buying bonds if they wanted, aside from their other activities.
Someone mentioned smart people thought we had to do this and no one knew if they were right or not. That is incorrect. SOME people pushed loudly that we needed to do this. Some actual smart people said we dont need to do this and that it would cause inflation. Multiple big name people said this in 2020 once 2 weeks became 3 and so on.
Some people even said specifically that the American political class will let inflation go crazy, and then let it come down to below 4% and start convincing Americans its fixed. Because they’ll want it back under control relative to the then still forthcoming explosion, but wont risk a recession.
In 2020, I agreed with those smart people. Moved my family to a poor fly over state. Took a manual labor job for half the pay I had at my systems engineer job, going from about 80k to 40k a year. I made my wife go to nursing school. We took on massive debt.
Now our house is almost paid off, the debt is almost paid off. We’re looking at buying a 2nd bigger house with our son who just graduated highschool. We’ll probably have 80% down if we dont keep this one.
So….
You CAN listen to the elite class and find SOME who are telling the truth, but it takes wisdom.
You CAN buy a house in this market on low income.
By the way, the fed absolutely could kill inflation immediately, but whoever does it looks like a villain at first because there would be 6 months of 10% unemployment. Also, if they had stopped printing money after the first round in 2020, we’d only have had minor inflation. If they raised higher for longer and sooner in 2021 instead of 2023, then also we’d probably have only had minor inflation.