David Zervos on Inflation, Fed Policy, and the Economy

Inflation Data Interpretation

• 💡 Core PPI year-over-year figures were higher in Q4 of last year when the Fed was comfortable cutting rates, suggesting current numbers might be noisy.
• 🎯 The services side of the latest data showed some quirky elements, but the overall good side was relatively tame.
• 📌 High-frequency data, like the PPI, is extremely volatile and doesn't always portend longer-term trends.

Federal Reserve Policy Stance

• 🧠 Zervos believes monetary policy is currently restrictive and has become even more so, partly due to balance sheet contraction.
• 🚀 He maintains his view that a 50 basis point cut in September would be appropriate, as he has advocated for in previous Fed meetings.
• ⚠️ He suggests that focusing too much on the