How the Fed and Most Economists Ignore Inflation, and Why That Means Big Trouble

by Lee Adler
Wall Street Examiner

The headline CPI numbers are finally starting to hit or exceed the Fed’s target, coming in at a seasonally finagled rate of +0.2% for both May and June. CPI understates actual inflation, and that plays havoc with other economic data. With the Fed focused on bad data, it has had the excuse to continue ZIRP in a futile attempt to increase consumer prices.

The BLS suppresses CPI by understating housing expense, using a ginned down measure called Owner’s Equivalent Rent (OER) instead of actual market rent or, heaven forbid, actual house prices. In 2016 they have been inflating by around 5% per year, depending on the measure. The rate was even higher than that in the years between 2012 and 2015, but the affordability issue is beginning to cut into that.

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