Once again, the inflationistas who are really rooting against new Fed head Kevin Warsh have been proven wrong. The June inflation numbers went negative. The July inflation numbers did almost the same thing. Consumer prices were basically flat, and producer prices the same.
I don’t really think much of the producer price index the way it’s been reconfigured by the Bureau of Labor Statistics, but anyway it was flat, 0.0 percent, for July. So for the last 3 months, the PPI is running 1.3 percent at an annual rate. And the CPI is up 0.5 percent at an annual rate. You can chop and slice and dice these numbers 100 different ways, but the reality is, disinflation is setting in this summer.
And just to confuse the matter, if you look at the old Producer Price Index, before the BLS mucked it up, and when it used to actually represent wholesale prices, the old way shows two negative prints in June and July and a 0.7 percent annual rise over the past 3 months. Now, that doesn’t mean that the inflation battle is over. It just means that Mr. Warsh was correct in not moving to raise the Fed’s target rate in his first few months in office.
Mr. Warsh is steady as you go, with a clear commitment to bring inflation back to its 2 percent target. A feat that his predecessor, Jay Powell, couldn’t achieve for five years. And as the Wall Street Journal editorial board points out, Mr. Warsh is not using “forward guidance” because it’s not necessary and people should focus on the actual data — not a dozen Federal Reserve regional presidents babbling all over the country. And the chairman himself is not leaking to certain reporters about what he intends to do. In other words, Mr. Warsh is cleaning up the system.
Now in terms of the inflation numbers, for context, the Cleveland Fed’s median CPI for the last 12 months is 2.7 percent. And its 16 percent trimmed mean is 2.6 percent. Mr. Warsh watches these alternative measures. So, the Fed is likely to stay on hold for a while, to see if the underlying inflation numbers come down to the 2 percent target. Along the way, they will hopefully be reducing their balance sheet holdings of Treasuries and treasury-backed securities.
Yet progress is progress, the Warsh critics are wrong. And the S&P 500 stock market index hit a new record high today, 7,800. And I know some people don’t like it when President Trump boasts about the stock market records. But I like it. As he put it on Tuesday night: “The country is doing well. The stock market, a fantastic record. We have 79 records so far in a short period of time.”
That’s right, I like it a lot. And you know who else likes it? Roughly 156 million American adults. That’s right. Ordinary working folks are participants in the stock market. It’s not just the wealthy pied-à-terre crowd in NYC, or rich people for short. It’s roughly 58 percent of adults, according to the Gallup poll, which comes to about 156 million American adults who own stock one way or another: index funds, ETFs, IRAs, brokerage accounts, bank accounts, even union pension funds.
That last one’s kind of my favorite, because most of the union leaders, most of them corrupt and stealing from those pension funds, filled with lefty Trump haters, even they benefit because a big chunk of their funds are invested in stocks. So the market’s having another great year, with a booming high-tech and manufacturing related economic prosperity, that all has a lot to do with Trumpian policies.
Is that going to help in the midterm elections? I’m going to bet that it does help. Americans love Trumpian free enterprise prosperity, not socialism.
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