Kevin Warsh's Fed left rates alone on July 29 and spent the press conference on something more consequential: which inflation measure deserves the weight. Five official gauges of the same June economy disagree by more than three percentage points, and a BEA methodology change landing September 30 will move the headline number without a single price tag changing.
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September producer prices rose 6.3% over twelve months while consumer prices rose 3.7%. The gap sits partly in retail margins: automotive fuel retailing margins fell 30.3% in a month. Here is how the squeeze works and what would end it.
A bond sold at par in June with a 9.625% coupon now yields about 14.8%, which implies a price near 80 cents on the dollar. The backlog and the interest bill answer different questions.
Headline CPI rose to 3.7% on a 9.1% gasoline jump. Core at 2.6% is the number the Fed will argue over, and the much-quoted record software prices carry far too little weight to explain it.