The Slow Roll of Monetary Policy

The Slow Roll of Monetary Policy – 7/11/2024 Update

“The Slow Roll of Monetary Policy,” was featured in our quarterly letter “The Long & Short of It” for five quarters from January 2023 to April 2024. Here, we will continue to show the slow, steady progression of monetary policy’s lag as it works through the economy and drives inflation. (See prior publications in previous quarterly letters.)

For the last 12 months, the CPI rose by 2.98% (see chart to right above), though the most recent numbers for the quarterly pace of inflation suggest the economy is slowing. The June 2024 Consumer Price Index (CPI) report indicated a decline of -0.06% for the month while Core CPI, which excludes food and energy, rose 0.06%. The quarter’s 0.26% and 0.52% increase in CPI and Core CPI annualizes to 1.0% and 2.1%, respectively which is at or below the Fed’s targeted goal of 2%. The resilience of inflation this year looks to be fading. The next several months will show whether the Fed will be overly successful in its efforts to bring inflation down.

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