Assume the estimate is in the ballpark. Would the Fed ignore it?
The first quarter is over. However, not all of the data is in. Here are the Cleveland Fed nowcasts.
2026 First Quarter Annualized
- CPI: 3.38 percent
- Core CPI: 2.53 percent
- PCE 3.89 percent
- Core PCE 3.63 percent
2026 Second Quarter Annualized
- CPI: 5.51 percent
- Core CPI: 2.58 percent
- PCE 4.56 percent
- Core PCE 2.95 percent
The Fed’s preferred measure of inflation is the PCE.
Q:Looking ahead to Q2, assuming the Cleveland Fed is in the ballpark, would the Fed
ignore 4.56 percent on the PCE with core at 2.95 percent?
A: It depends on what else is happening.
If the labor market is crashing the Fed might look the other way, possibly even find a reason to cut rates.
But if the labor markets are holding up, there would be a lot of pressure by the markets for the Fed to hike.
CPI and PCE Year-Over-Year Percent Change
We have a PCE monthly report tomorrow, but that’s for February, now largely irrelevant.
The only reason for the expected year-over-year PCE drop in February is a very easy comparison to last year. I am not convinced at all. Regardless, March and April rate to be disasters.
For March and April, the Cleveland Fed nowcast is for the year-over-year CPI and PCE to blast higher.
That’s my expectation as well.
Again we have the same questions, with the same answer. Will the Fed ignore these spikes if they happen?
We are going to find out because inflation from the war is baked into the cake.
For the Month-Over-Month nowcast, please see Cleveland Fed Projects Highest Month-Over-Month Inflation Levels Since June 2022
Inflation is directly ahead, and it will make the Fed miserable.
Trump is in a world of hurt. Self-inflicted.
Mish
Because of AI, cutting rates is no longer going to save jobs. No one who sets policy seems to understand that, yet. In fact, it is likely that cutting rates will accelerate the transition to AI, since cheaper loans provide incentive for productivity improvement investments. The Fed is in for a shock if they cut rates more than 25 basis points anytime soon.
US loses $200mil MQ-4 Triton drone over Gulf
Coming to your wallet soon
With several other (24 estimated) Reaper Drones lost in the 1st 9 days of this mo bringing the total to around $500mil.
Vs a $450 cost for baby-shaheed drones from China that can travel 18 miles flying at least 120 mph. So whats’a better deal, buying 400,000 baby drones, or one grossly overpriced one?
Inflation cannot occur unless there is an increase in aggregate demand, or an increase in either or both the transaction’s velocity or the money supply. Otherwise, an increase in oil prices will be discounted by a drop in competing deflationary prices (or a drop in core prices).
I.e. the FED must validate the higher oil prices for overall inflation to rise.
M*Vt = P*T
A lot of people are just bad at math.
The Fed has already eased.
See the H.4.1 release
The Federal Reserve restarted Reserve Management Purchases (RMPs) in December 2025, it has purchased about $93 billion in securities through early March 2026
And for anyone thinking Kegsbreath is controlling anything, he’s just a shabos-goy light switcher. You need to look behind the curtain.
Ron Unz points out something most don’t know:
“Hegseth seems so totally unqualified for his position and so much given to outrageous remarks and behavior that there are widespread suspicions that he has been kept in his job merely so that he can deflect attention away from Steve Feinberg, the controversial Jewish billionaire who serves as his deputy and may actually be running the department. Feinberg had co-founded Cerberus Capital Management, a buyout firm heavily involved in military contracting, and during his long business career he had been notoriously secretive, even going so far as boasting to his shareholders that he would “kill” any employee who got his picture in the newspapers. So an idiot such as Hegseth might serve as a very useful lightning rod.”
Unz article— “Is Donald Trump Facing A Military Mutiny Over His Losing War In Iran?”
Was yesterdays equities market a dead phony peace treaty bounce?
That was my read on the action yesterday. I was reluctant to gamble on the overnight move into yesterday, but then immediately didn’t trust the big gap up when the price action and headlines did not seem to mesh logically.
Now it feels like we are waiting for the next chess piece to move. A name like TSLA might be a decent broader indicator of where things are going to go next. It’s been downtrending and may be eligible for a signal of a bounce.
But the market seemed to go back to hard mode after the open yesterday.
It’s striking how close on track we are to repeating the 1970s inflation experience. Given the mountain of public debt that has accumulated and the bond market’s irrational faith that persistent inflation can’t happen under a Trump-led Fed, a 1970s-style inflation shock might actually be helpful in stabilizing public finances.
Oil back above $100, so much for opening the Straits…. oh well time to sell calls on oil stocks again and have some profitgasms 😉
Did anyone actually believe the Strait would be open at all, let alone to US ships? Four ships yesterday, none with US flags, is not even 5% of normal daily ship traffic.
Well suckers out in the market did so what can I do but take advantage and profit? I bought back calls cheap and now I am selling them again high. I’m talking 70% to 80% returns here on options.
The kicker is Trump will announce a new deal to juice markets on Monday and we rinse and repeat. The cash register doesn’t stop ringing here.
Yep…I remember it well…many similarities. Absolutely awful time to try and raise a family due to all the layoffs across many industrial sectors.
Still not even close.
Double the number, or more.
Many basic bottom-end foodstuffs up 50%+ in 3-4 years.
Yep
Yes. Like the coffee in my mug.
FYI:
Old Dollar Tree: $1.00/item, for years and years.
New Dollar Tree: $1.50 or $1.25 per item, many for $4.00+. .
You do not need to be a rocket scientist for this.
I cannot fault them, they need to stay in business.
Most of what is talked about when discussing inflation is really upward price changes, not actual inflation. Currently, prices are going up due to inflation, war, and supply/demand issues. Of these, the secular and structural component for increased prices is inflation. Inflation’s foundation is government spending above its revenue at a $2 plus trillion rate and increasing geometrically. The fed is in a hard place that it has facilitated via fixing interest rates below free market levels that has encouraged excessive borrowing. Near zero interest rate policy for close to a decade was adding gasoline to the already destructive fire. All this stimulated GDP numbers artificially because GDP dishonestly does not consider change in debt. Last fiscal year GDP would have been a trillion dollars lower if increased federal debt was subtracted.
The fed has surrendered control over inflation via its foolish past interest rate policy; its control is now in the hands of our fiscally irresponsible congress. To repair the problem, the entire deficit must be eliminated and debt total reduced annually. That means two to three trillion must be cut or taxed and one item not being cut is the $1 trillion annual and increasing debt service. Taxes are currently near 17% of GDP and since the income tax was initiated, federal revenue has never been above 20% no matter tax rate or policy so significant spending cuts must be a major part of the solution. Also, the government is dependent of the private sector for its financing therefore increasing taxes is ultimately counterproductive as it is punitive for the private sector.
There has been ZERO Organic US growth since 08′- strip out Gov/Corp/Consumer Debt- Negative GDP since 08′- Someone do a good job of lying and prove me wrong —
Exactly right plus federal debt to GDP ratio has been climbing over the period you mention therefore our fiscal problem is measurably getting worse. Chickens will be home to roost sooner or later. Below is backup data and the situation is the same looking at federal spending growth compared to GDP. It is the math behind the statement “our fiscal path is unsustainable”.
I remember a couple decades or more back hearing economists say the government could run 3% deficits indefinitely and how we could always print our way out of any debt problem What a crock of bs. The print mantra continues today, just stated differently, we can inflate the debt away, just a bs gimmick that will not work.
From Copilot: Evaluating GDP vs. Debt Growth
I need to compare the cumulative growth rates of GDP and federal debt since 2008. The debt-to-GDP ratio is key here: if it rises, debt is growing faster than GDP, and if it falls, GDP is growing faster. Since 2008, the ratio has increased from around 68% to over 120% in 2025, indicating that debt has grown faster than GDP overall. There were some years where the opposite was true, but overall, debt growth has outpaced GDP growth. Short answer: No—since 2008, federal debt has grown faster than GDP in dollar terms overall.
Here’s the clean way to see it:
You do get individual years where nominal GDP growth outpaced debt growth (e.g., some post‑COVID rebound years), but from 2008 to now in aggregate, debt growth has clearly exceeded GDP growth in dollar terms.
If you want, we can quantify it roughly—e.g., approximate compound annual growth rates for nominal GDP vs total federal debt from 2008 to a specific year.
I can take any wino off the street and make that wino look like a financial wizard, as long as the aforesaid wino is able to borrow and refinance.
For decades now, the United States has been that wino.
March and April? Come on, the whole rest of the year is going to be an inflation nightmare! The only way that doesn’t happen is if we have a global depression out of this stupid war.
There has been tons of oil infrastructure destroyed which will take months/years to rebuild. Oil production has been shut down and is still down and the freaking missiles are still flying! 20% of oil gone from market means that prices rise, no question about it.
The comments below are so out of touch with reality that it’s surprising.
Even if all hostilities stopped today, we have months/years of high oil prices barring a global depression. oh and there’s now a $2 million toll tax on all oil when it does start flowing.
Food, insurance, utilities, fuels, flights, cruises, etc are all going to be more expensive because of high oil costs.
Bookmark this post and check back in with me in 3 months and call me out if I’m wrong.
2 million dollar toll tax isn’t on US Oil since we don’t get ours from there. The countries that do will be the ones paying that tax.
Lol. You can’t be that naive? Oil is a global market, it’s like a balloon, if you squeeze it on one end the air goes to the other but the air is still all the same.
Isn’t Trump’s whole premise that they can get their oil from the US? If so won’t that drive up prices here?
It’s like these data centers that say they will pay for their own electricity except they will need natural gas from the open market to do it so they drive up the price of natural gas for everyone and thus the price of electricity goes up for everyone.
There are no islands on a global market. You should know better.
They won’t get oil from here. In theory they could but in reality they won’t.
To get oil you need a port that can handle the oil (existing pipelines and storage tanks already there) and has spare capacity to allow a whole bunch of tankers to come get that oil. Right now only Houston qualifies as a major port ready for oil shipping but it likely has no capacity to handle more ships without major investment in dock space and storage capacity and even then you get heavy oil.
So if you are Japan, are you gonna sail all the way around Africa and across the Atlantic to Houston to get the oil (tankers too big for Panama canal). Remember those tankers probably cost 500K a day to operate (I was on a 200 meter/600 foot ship a couple months ago offshore in the Gulf and was told that boat cost close to 500K a day to operate when maintenance was factored in). So the extra days to get oil from America is more than the toll to keep getting it from where it is.
Those tankers carry up to 4 million barrels. Each barrel is 45 gallons. So 2 million cost over 180 million gallons is a rounding error in the final price at the pump.
17% of oil imported to the USA is sourced from one of Iran, Saudi Arabia, and other OPEC nations.
Hmm, I wonder if domestic producers will seek to get some of that desperation money…?.
Gee, I guess they are..
US exports up over a million barrels a day (from 3.9 to 5.2 million) and is expected to go higher.
“Of course, the US oil producers wouldn’t eff the US consumer…?”
Naive, much?
I always go back to mothballed posts to tell people when they were right or wrong /s ain’t nobody got time fo dat
I’ll buy the dip on rate hike talk.
Fed has always been hugely hesitant to raise.
There are still tacos on the table. Expect more “tariff deals” if the market pulls back enough.
10-Year Breakeven Inflation Rate (T10YIE) 2026-04-08: 2.33%
Updated: Apr 8, 2026 4:02 PM CDT next release is today
The breakeven inflation rate represents a measure of expected inflation derived from 10-Year Treasury Constant Maturity Securities and 10-Year Treasury Inflation-Indexed Constant Maturity Securities. The latest value implies what market participants expect inflation to be in the next 10 years, on average.
Starting with the update on June 21, 2019, the Treasury bond data used in calculating interest rate spreads is obtained directly from the UST
10-Year Breakeven Inflation Rate (T10YIE) 2026-04-08: 2.33%
Updated: Apr 8, 2026 4:02 PM CDT
Next Release Date: Apr 9, 2026
The breakeven inflation rate represents a measure of expected inflation derived from 10-Year Treasury Constant Maturity Securities (DGS10) and 10-Year Treasury Inflation-Indexed Constant Maturity Securities (DFII10). The latest value implies what market participants expect inflation to be in the next 10 years, on average.
Starting with the update on June 21, 2019, the Treasury bond data used in calculating interest rate spreads is obtained directly from the UST
brent was 60$ in 2025! more or less
now it is 100$ paper
and $150 real
you do the math
Short answer: Yes, they would largely look past the headline PCE spike. The Fed’s preferred inflation gauge is indeed the PCE price index, but Chair Powell and the FOMC have repeatedly emphasized that they focus on underlying (core) trends and longer-run expectations rather than volatile headline moves driven by food or energy.
Bottom line: The Fed will treat the 4.56% Q2 headline PCE as largely ignorable (transitory energy), stay focused on the 2.95% core PCE reading and other data, and keep policy restrictive. Expect rates on hold at 3.5–3.75% through most of 2026, with at most one 25 bp cut late in the year—exactly in line with their March projection unless core inflation surprises to the upside. They remain data-dependent and will not overreact to one quarter’s nowcast. The next FOMC meeting (April 28–29) will give the first official reaction to these latest Cleveland Fed figures.
Grok AI
Short answer: No — not if those numbers actually materialize and the labor market remains intact. A 4.56% headline PCE with core at 2.95% is far above the Fed’s comfort zone, and historically the FOMC has not ignored sustained re‑acceleration in its preferred inflation gauge unless something else is breaking.
But the Fed’s reaction is conditional, and the source you surfaced makes that explicit: if the labor market were “crashing,” the Fed might look the other way; if the labor market is holding up, markets would pressure the Fed to hike.
How the Fed would likely interpret those numbers1. Headline PCE at 4.56%This is more than double the Fed’s 2% target. Even if driven by energy or geopolitical shocks, the Fed has repeatedly said it cannot “look through” inflation that persists long enough to affect expectations.
2. Core PCE at 2.95%Core is what the Fed actually uses to judge underlying trend.
At ~3%, it signals that disinflation has stalled. That alone would make the Fed uncomfortable.
3. The Fed’s reaction functionThe Fed’s decisions hinge on three variables:
If inflation is re‑accelerating and the labor market is still strong, the Fed historically tightens or at least signals tightening.
If inflation is re‑accelerating but the labor market is deteriorating, the Fed sometimes tolerates higher inflation temporarily.
The article you surfaced captures this exactly:
What would make the Fed not react to 4.56% PCE?Only a few scenarios:
Without those, the Fed would treat 4.56% PCE as a problem.
What the Fed would definitely not do
Bottom lineNo — the Fed would not ignore 4.56% headline PCE with core at 2.95% unless the labor market or financial system is deteriorating.
If labor markets are stable, the Fed would face intense pressure to tighten or at least halt any easing path.
If you want, I can map this to the Fed’s historical reaction function (1990–2024) and show how similar inflation‑labor market combinations were handled.
Copilot
We’ve seen this same Fed chair use the term transitory through massive and lengthy inflation increases, to the point of PAIN to all economic players and then had to raise it from zero! to around 5.33 effective over 16 months. So, late again with lower-rate skew persisting. My guess is though they should raise rates they’ll claim the “excursion” leads them to wrongly believe transitory yet again and stand pat as long as inhumanly possible. They are a criminal enterprise in their intent, negligence and complicity to fund a government and frankly a society flimsily built on cheap credit. Given Trump’s entire presidency is now impaired by the biggest own-goal in history there’s all the more reason to tighten harshly, raise them and stop inflation–but they likely won’t. But they surely can’t cut.
Mish, you’re fired.
The whole Cleveland Fed is fired.
No reason will be given.
You’re also fired.
Fired, fired, fired.
Stupid fake news.
I doubt it will stop the taco controlled fed from lowering rates if given the chance.
Theres’a zillion things to take Trump to task for but to say that the fed is taco controlled is all sorts of cra cra. Every time this blog comment section makes the statement you simply have to look at the federal funds rate chart from about, oh, say 2008 forward and see when ZIRP occurred and which party benefitted(?) from the lowest rates.
But to add recency, of the last 5 rate cuts there were 75 bps of cuts immediately prior to the 2024 election, a political period where it’s normally quiet (hmmm) and then 2 25 bps cuts for Sep and Oct 2025. If that’s a TACO-controlled fed I’m a ham sandwich.
They’ve been given the chance numerous times since his election and precisely 2 times they’ve lowered, neither of which made sense. I’ll comment separately on the post itself.
The Strait remains closed and in light of Trump newest post on Truth Social, that is unlikely to change anytime soon, so expect even steeper inflation moving forward.
We just need to include some new items in the mix. Hotel prices in Dubai, for example.