Kudlow Says the Fed Should End the Rate Hikes
He has pretty decent reasons:
In fact, over the past 12 months the Fed’s preferred core consumer spending deflator has increased only 2%, actually lower than its 2.3% rate last November, which is 10 months ago. Their range is 1.5 to 2.5%, so they have done a good job. And it’s possible core prices are heading back down after 15 months of tightening.
While the rise in gold prices is troubling, the yield curve has flattened, the dollar is strengthening, bond rates are historically low, and the T-bill is well below the Fed funds rate.
So the weight to the forward-looking inflation evidence, as well as the core consumer deflator, suggests that the central bank has done enough and should take a well-earned vacation from future tightening moves.
I’d be satisfied with “one-and-done.” Don Luskin, as noted earlier, not only doesn’t agree but thinks there will be three more hikes between now and January 31, 2006.
