Fed Should Focus More on Core inflation — Market Talk

What happened

Jay Hatfield of Infrastructure Capital Advisors said the Federal Reserve should back off its rate increase policy and focus on core inflation rather than oil-driven inflation. He also urged reform of the Fed's forecasting models, its 2% inflation target and the inflation indices it uses.

Confirmed

Global impact / market context

If the Fed weighted core inflation, which strips out volatile food and energy prices, more heavily, it might raise rates less when oil alone pushes prices up. That would change borrowing costs for homebuyers and housing-related companies, which Hatfield says the Fed affects most.

Analyst inference

The call comes as investors weigh how far the Fed will keep raising rates to fight inflation. Hatfield's argument that housing bears the main impact links rate decisions to real estate and interest-sensitive assets, and his push to reshape the 2% target questions how investors judge future policy.

Analyst inference

What to watch

1. Hatfield said Infrastructure Capital Advisors is awaiting results from the Fed's task force, which may address what he called fundamental flaws in the central bank's forecasting models and inflation indices. Confirmed
2. Hatfield proposed that the Fed reform its forecasting models, revisit the 2% inflation target, which is the goal for yearly price growth, and change the inflation indices it follows. Proposed
3. Watch whether the Fed signals more weight on core inflation, which excludes oil and food, since that could mean fewer rate rises when oil alone drives prices and would affect housing costs. Analyst inference

Evidence

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