As shown in the above figure, the CPI calculated on an annual basis finally reached a new low in recent times after yesterday's data update. Everything seems to be getting better, but why is the Fed, including Powell, still extremely cautious about cutting interest rates? Is the Fed going to not cut interest rates again without seeing a recession?

I was also confused at first, and even thought that with such good data, there should have been an interest rate cut at the end of July, but the market did not have this expectation. So after studying the statistics and calculations of CPI, I found that the Bureau of Labor Statistics has an interesting calculation method, which is the "1982-1984=100" benchmark algorithm. Can you briefly explain what this calculation method means and why it exists?

Looking back at the above chart, you will clearly find that in the 36 months from 1982 to 1984, CPI did not get out of the huge inflation in the previous hyperinflation era, but instead had very mild inflation, which gave rise to the beginning of a new round of 20-year bull market in the US stock market (until the end of 2000). Therefore, there is a calculation method that uses the mild inflation level as a benchmark unit to determine whether future inflation will get out of control; for example, by opposing the current inflation changes with the mild inflation between 1982 and 1984, the current inflation value is obtained; that is, the voter map:

Judging from the information provided on the stamps, it seems not difficult to explain why the Federal Reserve can raise interest rates and shrink its balance sheet at an extreme speed rarely seen in history in 2022; even if the annual inflation rate at that time is only 9%, the historical inflation prices do not seem to be very exaggerated; this is because if the CPI is calculated simply according to the rate of price growth without considering the actual base price of prices, then the annual CPI rate in the future will only get lower and lower, because prices have gone up and the base has become larger;

If we use the specific price increase amount in history as a benchmark, we can see that actual prices have not risen rapidly. To put it bluntly, when each of us looks at the market, the display differences between the "conventional" and "logarithmic" coordinates are similar, which is a very good ultra-long cycle perspective. At present, although we can see that the CPI under the benchmark measurement method has fallen back to a relatively low level, it has not fallen back to the milder inflation range in the past 10 years. If the Fed does not want to cut interest rates, then the Fed is likely to repeat the great inflation that started in 1972. This also means that the Fed has announced an inflation level of 2% in the past period of time, because if the CPI annual rate is close to 2%, then the CPI under the benchmark measurement method can also return to normal levels, rather than the "falling back to the highest inflation level in history" that it seems now.

Therefore, my expectation of a rate cut in July has completely disappeared, and the risk of a decline in the money supply remains doubtful; although the current CME interest rate has begun to decline, the US government is still regulating through fiscal means;

The Fed's maintenance of interest rates seems to be a passive behavior; especially with the election approaching, if the Fed makes any unexpected behavior, it will be interpreted as taking sides in the political camp, which shows that the Fed is more concerned about interest rates;

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