After completely missing the slowdown in the U.S. economy last year, a complacent Federal Reserve is at risk of falling behind the eight ball (once again).
Inflation is accelerating.
Today, the Consumer Price Index (CPI) hit a year-over-year headline rate of 2.1% for the month of December from 1.7% in the prior month. This effectively ended 30 straight months of inflation readings that were stubbornly below the Fed’s 2% target.
Fed officials will get what they wished for heading into the first quarter of 2017, however. Our proprietary leading indicator suggests year-over-year inflation could hit three, even four, percent.
“That’s going to be really nasty for the Fed to deal with,” says Hedgeye CEO Keith McCullough in the video above. “That’s why the Fed, for the first time, isn’t hawkish enough. They should be talking about a lot more rate hikes.”