Fischer’s speech at Jackson Hole and Lacker’s comment Friday that “The last half year of data show that inflation already has returned to our 2 percent objective” made me take a closer look at the mom inflation data. I suppose if you were to just look at the last 6 months of data, you get the roughly 2% annualized on the headline inflation and roughly 1.2% yoy on the core inflation.
The thing that really stands out in the table are those three months around year-end where the PCE dropped precipitously (red bold on table). If we assume headline inflation is typically 0.15% mom, then we can see an increase of 125 pp to yoy inflation over those three months. If you are looking at a 5.1% UR and 0.4% yoy PCE inflation, optically the case for a hike doesn’t look that strong. However, a 5.1% UR and 1.8% yoy PCE is a completely different story. That could be the situation if the status quo holds in the data for the next 6 months. I realize a lot can change in the data in 6 months, but the data could get stronger as well (despite the headwinds). So that is why I sent out Trade E24 on Friday. Regardless of what the Fed does in the next few months, there should be a huge spike in PCE by the end of Feb (or early March), just in time for the March Fed meeting. Regardless of whether this is the first or second hike, the March meeting seems like it should be more than the 30% currently priced in.
 Never mind that WTI was over $60 for parts of July.
 Assuming all months average 0.15 mom.