Honestly, I feel like I would really like to write about something other than new Fed Chairman Kevin Warsh. Because it feels like everyone is writing about him, and about his remarks at Jackson Hole. What I found remarkable was that his comments actually seemed to have relatively little effect on markets, compared to prior Fed Chairmen. I’m pretty sure that’s by design, but what is really fascinating is that while what he said seemed pretty clear to all pundits every one of them seemed to have a different read.

The Bloomberg survey’s consensus numbers headed into CPI today were for +0.11% on headline inflation and +0.20% on Core. Considering the downside surprises last month, that’s a pretty tame forecast that says ‘no givebacks’ for the surprises. Last month’s downside outlier on CPI, which cemented market consensus that the Fed wouldn’t hike rates in July, was mainly the result of surprises in rents, cell phones, and car insurance.

Okay, I will admit that I came into today thinking ‘this is one of the more low-stress releases in quite a while. We know headline inflation is going to be negative, and it’s just a question of whether core is 0.20% or 0.26%.' The Bloomberg consensus was for -0.12% (seasonally adjusted) on headline CPI, and +0.23% on core CPI. That core CPI forecast would annualize to 2.8% or so, clearly indicating that inflation hadn’t fully returned to target but also not super alarming.

A few weeks into the Warsh Fed Chairmanship, and there are a couple of changes that I think are worth pointing out. Both are subtle, and I present them as a longtime Fed watcher and rates strategist and Inflation Guy. The first one is something I missed at first, until I heard it again. Warsh has been talking in terms of the Federal Reserve having a 2% inflation target or goal.

While the worst is probably over for the monthly CPI prints, the real question going forward is ‘how much better does it get?’ We know that energy prices will eventually retreat, but even if they merely flatline they will stop flattering headline CPI. But where does core and more importantly median CPI settle in? That’s the real question. For now, we just have one more month of data so let’s dig in.

I read recently – I can’t find where – that stock/bond correlations in the US are the highest (most positive) they have been in decades. This of course is bad news for investors who commonly allocate to both stocks and bonds with the expectation that adding bonds will reduce the risk of a portfolio not only because they have a lower natural volatility than do stocks but also because the expectation of negative correlations between them have the effect of lowering the volatility of the portfolio further (since the variance of a 2-asset portfolio is equal to the weighted sum of the variances…

I promised last week that I would give you my views about Kevin Warsh. I did so while clearly forgetting that I already have. Having heard more from him, though, I can put more meat on that bone. I must first tell you that I have a natural tendency to want to believe that our monetary policy institutions can be saved, and so I…

This is just a brief note to clarify something about the construction of USDi, about which I’ve gotten a number of calls. Before I do, let me also tell you to be on the lookout for my blog next week, when I’ll tell you what I think about Probable-Next-Fed-Chairman Kevin Warsh. (In the behavioral economics world we call that a ‘precommitment’ strategy that has the effect of forcing me into doing it.

We have CPI coming up in a few days, but M2 came out recently and it is worth commenting about, so let me drop some thoughts about the state of money and velocity right now and the context we are operating in. M2 grew 0.88% in February, causing the y/y change to rise to 4.88% (quarterly, however, it is 6.65% annualized).

For Christmas, my daughter gave me the pamphlet "Inflation in One Easy Lesson," by Harry Scherman. (Yes, I am that typecast that my daughter gives me inflation memorabilia for Christmas!) It was written during World War II, and distributed by the Council for Democracy. It is so delightfully simple and direct, and makes the main point so obvious, that I want to share it.

One of the nice features of the USDi digital currency is that its path is known with certainty well in advance. The price of USDi is determined by the interpolated CPI index value compared with the value on the reference day (315.605). So, for example, we know that today’s[1] USDi value is 1.02681 because today’s CPI index value is 324.06614, and we know…

Let’s start by setting the context for today’s CPI number. A couple of months ago, we missed a CPI because of the shutdown. The BLS simply didn’t have any data to calculate the October 2025 CPI. That wasn’t the real problem. The real problem was that the BLS’s handbook of methods more or less forced it, in calculating the November…

Before I tell you what I think about Trump’s nominee for Fed Chairman, Kevin Warsh, I should first confess to the fact that my opinion of Chairman Powell has changed several times since he was first nominated. That’s a user-beware warning about my thoughts below, but it’s not just about me. I’ve watched the Fed since about 1990 – I wrote a book leaning against the perception of Chairman Greenspan as some kind of “Maestro” – but what happens when individuals meet institutions is that both are changed.

For a couple of years, I have been relentlessly defending my forward inflation forecasts against a sizeable group of people who looked at various high-frequency rent indicators and concluded that rents were going to be imminently in deflation. (For most of the last year many of those same people thought tariffs would be a large and immediate effect increasing inflation. Fortunately for them, being wrong on both counts, at least the errors offset somewhat.)