President Trump rages about lowering interest rates and says there is no inflation that would prevent the Federal Reserve from doing that. He is only partly right. Today’s report on inflation in July showed a pretty modest 2.7% rise year-over-year. I think the way many things are calculated in this index make no sense–like housing costs and medical costs, two items that collectively account for 40% of the US economy. Housing should be based on actual rents and house prices, including mortgage interest costs. Medical care should be based on the prices actually paid by the major payers–Medicare, Medicaid and private health plans. That isn’t the way either is calculated. If it was, we would have significantly higher inflation readings.
The most meaningful inflation measure would be a basket of what consumers actually need and want to buy, weighted by volume. No seasonal adjustments, no other goofball adjustments designed to make inflation look lower. So if you look at today’s report, even with the BLS methods, here is what drove price increases–health care, car insurance, and housing. Those are all items that consumers have to have. Arguments about the effect of tariffs are pointless now, wait til all the trade nonsense is done and let’s see the impact. I am betting it will fuel some increase in inflation, depending on how much the growth in the money supply facilitates spending.
Bottom line–inflation is still a real problem for most consumers, and wait until they see their health insurance premiums for 2026.
