With the year-over-year consumer price index now running at a 7.5% and with Core CPI at 6%, it is so obvious that the Fed's zero interest rate policy is way behind the curve. In ancient times the Paul Volcker of 1979 and the 1980's and the Alan Greenspan of the late 1980's and early 1990's would have acted with alacrity, meaning there would be an intermeeting rate hike to highlight the seriousness of their concerns about inflation.
The 20 year era of Fed gradualism on the upside is over as the low inflation environment of the past two decades is now behind us. Moveover both the housing and healthcare components of the CPI are lagging realtime pricing making it likely that inflation will remain higher for longer. Indeed wages are up 5.7% year over year and are likely to move higher as the fully employed economy will continue to be strong.
Remember as Milton Friedman, another member of the ancien regime, noted that monetary policy acts with long and variable lags. Thus it is time to act and furthermore an intermeeting move will restore the Fed's and Chair Jerome Powell's waning credibilty as an inflation fighter.
I would note that this is not a prediction, but rather what I think the Fed should do. We'll see.
