This means we trim out the most volatile price movements in the consumer basket to achieve the best sense we can of underlying price stability. In the July statistics, we saw some of the fastest rates of increases in a while for the largest, leastvolatile components of core services, such as rent and purchased meals.3 So the jury is out as to whether we have seen a reversal in the recent upward ascent of prices toward our 2 percent target. As to achieving “moderate interest rates”, the dashboard shows that we have overshot the mark. Interest rates on the lowest-quality credits – on “junk” – are historically low, as are the spreads they are priced at above the current historically low nominal rates for investmentgrade credits. I have been involved with the credit markets since 1975. I have never seen such ebullient credit markets. The 30-year Treasury yield is trading at a hair over 3 percent. If Ambassador Jaishankar and I were to abandon our service to our respective nations and form a company, we would use our good names to borrow as much money as we could at current rates.
He noted that President Harry Truman “wanted a one-armed economist, not the usual sort that analyzes every problem with ‘on the one hand, this, and on the other, that.’” Gross claimed that Fed Chair (Janet) Yellen, in her speech given recently at the Fed’s Jackson Hole, Wyo., conference, introduced so many qualifications about the status of the labor market that “instead of the proverbial two-handed economist, she more resembled a Hindu goddess with a half-dozen or more appendages.”2 Whether you analyze the labor markets with one arm or two, or six or 19, the issue is how quickly we are approaching capacity utilization, so as to gauge price pressures. After all, a central bank is first and foremost charged with maintaining the purchasing power of its country’s currency. Like most central banks around the world, we view a 2 percent inflation rate as a decent intermediate-term target. Of late, the various inflation indexes have been beating around this mark. Just this last Friday, the personal consumption expenditure (PCE) index for July was released, and it clocked in at a 1 percent annualized rate, a pace less than the run rate of April through June. Does this mean we are experiencing an inflation rate that is less than acceptable? I wonder. At the Dallas Fed, we calculate a trimmed mean inflation rate for personal consumption expenditures to get what we think is the best sense of the underlying inflation rate for the normal consumer.