"I like to compare the Fed's problem to the challenge of adjusting the shower in an old hotel, where there's a lag of 20 to 30 seconds between the time you turn the faucet and the time the water temperature changes. It's very hard to avoid scalding yourself or freezing yourself." - Larry Summers

This morning’s Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation gauge, came in 0.2% lower than last month. However, it is still at levels not seen since Paul Volcker walked the halls of the Eccles Building in Washington DC. Mr. Volcker has been invoked lately as the Fed is dealing with inflation comparable to what Mr. Volcker saw during his tenure. He is best known for conquering inflation with massive rate hikes and taking the poison pill of a Fed-induced recession. During his tenure, the Fed Funds rate eclipsed the level (unthinkable today) of 20%. Construction workers used to send him 2x 4x’s with notes inscribed since his unpopular but ultimately successful policy devastated housing demand which hurt construction as well.

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Inflation is at levels not seen since the early 1980s. There are many causes of this unfortunate situation. As we might have been getting some relief as the economy normalized compared to the extraordinary s...

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