Should the Fed turn it’s attention to inflation, it will find itself way behind that curve.

The US cpi is about 100 bp higher than the eurozone cpi’s, including the UK where rates are north of 5%.

With US inflation where it is, the mainstream calculation for the appropriate ff rate is probably north of 7%.

The way the mainstream now sees it, the more the Fed cuts to get ahead of the ‘economy curve’ (whatever that is), the further it gets behind the inflation curve.

At this point if may not take much in the way of economic ‘improvement’ to redirect the Fed’s attention. A sign of a housing turn might be sufficient.

And with a general inflation underway, housing prices will go up as well, regardless of weakness, due to cost pressures, much like the late 70’s.

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