The BLS compiles the CPI data, the Fed chooses to exclude food & fuel in order to get at the trend without swings. There may be some downstream impacts into the other categories, but that is what they do, then they can look at food & fuel as separate items and make determinations as to what is driving them now and what is likely to drive them in the short, intermediate or long term horizon. Since the numbers get messaged, if their assumptions are off, they will either undershoot (contract) or overshoot (overexpand) their growth target. The biggest problem I have with the Fed, and the Federal government at large is they are still tragically locked into Keynesian bullsh*t! They forget that real inflation is composed to two items - price changes and the FALLING VALUE OF MONEY! What Debator is referring to in his post about QE is not entirely correct, he is referencing the velocity of money. If money provided by QE was churned more, inflation could increase due to the velocity of the turnover and lead to hyperinflation. It's like a pump pumping more air into a tire, you don't want to over-inflate the tire lest it explode. Problem is, these Keynesian fools threw out caring about velocity back around the late 80's early 90's. Hell, does anybody remember M1, M2 etc? Hell no. So would these jackasses see hyperinflation on the horizon they way they look at things now? Probably not, it would be too late for them to act once it started showing up. And the even bigger, ugly damn gorilla in the room is the value of money. I'd like to hear anybody try to explain how QE is not helping to debase our currency. I'd like to see somebody argue how intervention into currency markets no matter the reason is not debasing our currency. And I damn well know there isn't anybody out there who can articulate how the grotesque spending binge the Proglodytes and Ruling Class have been on and the resulting massive debt load and required interest payments are not eroding the hell out of our currency!
