The Fed should concentrate on assessing forward-looking data such as “on the ground” real estate prices as those “are actually beginning to go down,” Siegel said.
The Consumer Price Index is backward-looking data. “We know the way that index is constructed, housing costs, which are a big factor of core inflation, are very lag in the way they are put into the index.”
The Fed remains far off from its 2% inflation target. On Friday, the central bank’s preferred inflation gauge, the core Personal Consumption Expenditures Price Index, or PCE, came in at a 4.6% rate in July year over year, and was up 0.1% month over month. The reading was softer than expected, with Econoday’s consensus estimates at 4.7% and 0.3%, respectively.
Core CPI in July was 5.9%, and the headline inflation rate, including energy and food prices, was 8.5%, easing from 9.1% in June.
This week, the second reading of second-quarter gross domestic product was revised to show a contraction of 0.6%, narrower than the 0.9% contraction in the preliminary reading.
