Don't Get Too Excited About Jackson Hole

Markets are apparently getting excited about the prospect of more intervention from the Fed. They would do well to temper those expectations, given that the most critical hard economic data -- unemployment and inflation -- point toward a Fed doing less, not more. CPI was up .5% in July, with even the core up .2%, and up 1.8% over the past 12 months, means that the Fed would be reluctant to do much more regardless of unemployment. And payroll employment was up 117,000 in July -- a bad number for most Fed's, but promising given the past few months, which means Bernanke will stand pat.

I was, admittedly, surprised at the July inflation numbers, as reduced inflation in automobiles stemming from the tsunami was already built in, and the increase in the core rate fell only from .3% to .2% in July, due to countervailing increases in the price of services, including shelter.

This is the highest the 12 month change in core inflation has been for over 2 1/2 years. I definitely don't see the Fed doing more. In fact, I would expect Bernanke to give stern warnings about an exit strategy if inflation doesn't slow in the coming months (which, I predict, is likely).