Most anyone of my generation can remember the popular TV police drama Hawaii Five-O, starring Jack Lord as Detective Steve McGarrett that ran from 1968 through 1980. It was reprised in 2010 with a new set of characters running for another ten years.  “Book ‘em Danno.” was a phrase often delivered by McGarrett to his fictional sidekick, Danny “Danno” Williams. It was a cliché meant to authorize the arrest of a suspect, bringing to conclusion another Five-O squad’s successful efforts at crime fighting. Our current inflation fighting team at the Federal Reserve, led by “Detective” Jerome Powell raised short-term interest rates by 5 percentage points in less than 14 months in its attempt to halt the crime against consumers known as inflation. Only this drama is not yet over, and we will need to wait until the fall to see how things turn out for our crime fighters.
The FOMC (Federal Open Market Committee) increased short-term interest rates at one of the fastest paces on record in its attempt to reduce inflation. Team FOMC hiked the fed funds rate a quarter of a point on May 3rd to a range of 5.0 to 5.25% in its tenth – and what many believe will be its final – act before a sustained pause. Inflation, as measured by the CPI (Consumer Price Index) increased month-over-month in April at a rate of 0.4%, with a year-over-year increase of 4.9%. Drilling into the details, core inflation (which excludes costs of food and energy) rose 0.4% month-over-month and 5.5% year-over-year. These numbers were slightly below March rates and lend further evidence that the Fed’s efforts are starting to produce fruit. The economy is slowing in many areas, but the employment picture remains strong (unemployment is currently 3.4%, the lowest rate since 1969) and is one of the data sets on which the FOMC is focused. We may or may not have a recession and a recession is not necessarily required to kill inflation which is the result of many variables.
In the TV drama, the Five-O moniker is believed to represent Hawaii as the 50th state to join the union. In the current drama, let’s hope Five-O reflects the FOMC’s target of 5.0% as the beginning of the end for unacceptable inflation. Will Jerome finally be able to tell his sidekicks at the FOMC to “Book ‘em” or will they jump back in their data-fueled squad cars to continue chasing inflation bandits?
Stay tuned!