“The Whites of Their Eyes”

CEA Chair Phelan on the need for a 50 bps increase in the Fed funds rate, given the hot CPI readings today, contra Waller and Logan (Bloomberg):

Christopher Phelan, chairman of the White House Council of Economic Advisers and a former adviser to the Minneapolis Fed, said there’s no case for a half-percentage point move in December.

“I’ve always followed the Revolutionary War doctrine of don’t shoot until you see the whites in their eyes,” Phelan told Bloomberg Television. “The whites in their eyes for a 50 basis point increase, as far as I’m concerned, isn’t there yet.”

Here’s PCE deflator and core PCE deflator nowcasts as of today:

Figure 1: PCE deflator (blue, left log scale), Cleveland Fed nowcast of 11/10 (blue inverted triangle, left log scale), core PCE deflator (red, right log scale), Cleveland Fed nowcast of 11/10 (open red square, right log scale), all 2017=100. Nowcasts based on y/y changes. Source: BEA, Cleveland Fed. 

The PCE y/y inflation nowcast was moved up from 3.77%  to 3.81%, while the core was moved up from 3.20% to 3.21%. 3.81% is above the PCE deflator target of 2%. Not sure what the “whites of their eyes” are in this context.

Here’re market reactions: