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The Fed’s Interest Rates Are Still Fueling Inflation Rather Than Dousing It, and People Getting Used to This Inflation

May 11, 2023

by Wolf Richter Wolf Street

Turned upside-down since late 2008 with QE and interest rate repression, it still hasn’t been turned right-side up.

The Fed has now raised its policy rates by 500 basis points in a little over a year, with the top of the range now at 5.25%, and with the Effective Federal Funds Rate at 5.08%. But “core” CPI, which excludes the volatile food and energy components, has gotten stuck at around 5.5% to 5.7% for the fifth month in a row. There wasn’t any progress at all with core CPI in five months. Inflation intensity is simply shifting from one category to another. As inflation temporarily subsides in one category, it resurges in another.