Obama-Era Economic Advisor Analyzes 'Amazing' June Inflation Data: Easing Financial Conditions Are 'Doing The Fed's Job For It'

Author: Benzinga Neuro | July 12, 2024 01:12am

Jason Furman, a prominent economist and the former Chair of the Council of Economic Advisers under former President Barack Obama‘s administration, has shared his insights on the current inflation scenario in the U.S.

What Happened: Furman provided an analysis of the inflation data for June in a social media post on X on Thursday, suggesting a shift towards the lower end of the underlying inflation range, the Consumer Price Index-based Ecumenical Underlying Inflation measure for June was 2.5%.

This figure is the median of 21 different measures, all adjusted to match the Personal Consumption Expenditures targeted by the Federal Reserve.

Furman pointed out that excluding shelter costs, the core inflation measure fell below the Fed’s 2% target over the past three, six, and twelve months. He highlighted that the trimmed mean and median measures showed significantly higher figures in June compared to other metrics, indicating possible influence from volatile components in the data.

Note that core ex shelter is also below the Fed's 2% target on a 3, 6 and 12 month basis (a few other measures also below on the more volatile 3 month basis).

If you look at core PCE ex housing will still likely be above the 2% target. Plus the Fed includes housing.
— Jason Furman (@jasonfurman) July 11, 2024

The economist also mentioned that the trimmed mean and median measures were significantly higher in June than other measures. This suggests that some of the good number was due to volatile components, making the signal a little less clear. “I’m mostly seeing forecasts for 0.20% core PCE in June,” Furman wrote.

Furman’s initial analysis stated, “Amazing inflation data for June!!!” He concluded by saying that he still views the underlying inflation to be in the 2.5-3% range, but is shifting closer to the lower end of that range. He also mentioned, “financial conditions continue to ease–doing the Fed’s job for it.”

Overall my judgment is still view that underlying inflation is in the 2.5-3%. But I'm shifting closer to the bottom of the range and will learn more from PPI, PCE and ECI later this month.

In the meantime, financial conditions continue to ease–doing the Fed's job for it.
— Jason Furman (@jasonfurman) July 11, 2024

Why It Matters: The latest inflation figures have been a topic of intense discussion. The U.S. CPI slowed more than expected in June, reaching 3%. This has led to increased expectations for a near-term initiation of interest rate cuts.

However, not everyone is convinced that these numbers are enough to prompt a rate cut. Blu Putnam, the former chief economist at CME Group, expressed skepticism about the idea that the Federal Reserve will cut interest rates based on the lighter inflation numbers.

Meanwhile, Peter Schiff, a vocal critic of Bitcoin (CRYPTO: BTC) and the Federal Reserve, has criticized the Fed’s role in inflation and advocated for a return to the gold standard. His comments came amid calls for rate cuts by Nobel laureate Paul Krugman.

Given the potential impact of these inflation figures on the Fed’s decision-making, it is essential to consider the central bank’s stance on other economic indicators. Federal Reserve Governor Lisa Cook has emphasized the central bank’s readiness to act if the unemployment rate surges, indicating a responsive approach to potential economic challenges.

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