Inflation well above target, yet rate cuts still on the table.

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Inflation at 3.8 percent…

Fed still signals rate cuts…

The dollar is being sacrificed…




The conflicting forces the Fed is trying to balance:

Economic Driver Current Status (May 12) Fed’s Pressure Point
Inflation (CPI) 3.8% (Rising) Needs higher rates to cool
National Debt Record Highs Needs lower rates to survive
Energy Costs Surging Beyond Fed’s control
Market Sentiment Fearful Expecting a “pivot” soon



While April CPI inflation rose to 3.8%, inflation is much higher in many basic necessities:

1. Energy Commodity Inflation: +29.2%
2. Gasoline Inflation: +28.4%
3. Airfare Inflation: +20.7%
4. Energy Inflation: +17.9%
5. Electricity Inflation: +6.1%
6. Fruits and Vegetables Inflation: +6.1%
7. Hospital Services Inflation: +5.5%
8. Motor Vehicle Repair Inflation: +5.1%
9. Apparel Inflation: +4.2%

This has driven cumulative inflation since 2020 to +29%, meaning goods that cost $100 in 2020 now cost $129 today.

Inflation remains a major issue for Americans.


“Americans are literally getting squeezed”: A top economist on why your wages are disappearing

Consumer sentiment in the U.S. has officially never been worse. The University of Michigan’s final April reading came in at 49.8, the lowest in the survey’s 74-year-history. Three of the four lowest sentiment readings ever recorded have now happened in the past nine months.

To be fair, the survey isn’t without its critics. Economists have pointed out for years that the gap between what consumers say in surveys and what they actually do has widened. Gen Z economic commentator Kyla Scanlon coined the term “vibecession” when sentiment was grim but spending was buoyant during the Biden administration.

Analysts also note that the survey can be distorted by partisanship. A 2024 Richmond Fed study found that people feel 31% better about the economy than the data would suggest if their party controls the White House.

The trouble is that sentiment surveys may measure not how people feel, but which words people have learned to use to describe how they feel.

Heather Long, a chief economist at Navy Federal Credit Union who made her name covering the pandemic recession, believes the sentiment data speaks to something real.

“Americans are literally getting squeezed now,” she told Fortune. “It’s not just a vibe, it’s a financial reality.”

 

The fact that the Fed is even talking about rate cuts while inflation is at a three year high tells you everything you need to know about the state of the US economy. We are watching a total surrender to the reality that the government is so deep in debt it can no longer afford to fight rising prices with high interest rates. This matters because it means the value of your dollar is being sacrificed to keep the federal budget from collapsing under its own weight. While you are struggling to pay for gas and groceries the central bank is looking for an excuse to start printing money again which will only make the next wave of inflation even more brutal. They are trapped in a corner where they either have to let the government go broke or let the middle class be wiped out by runaway prices. By keeping rate cuts on the table they have clearly chosen to save the bureaucrats in Washington while leaving the average family to drown in a cost of living crisis that has no end in sight.