The key reasons why supercore inflation remains high are auto insurance and hospital services, and it is a legitimate question to ask whether the Fed keeping interest rates higher for longer will slow down inflation in those two categories, see chart below.
The problem with that logic is that housing inflation is also high, and if the Fed were to lower interest rates, it would put new upward pressure on the demand-driven components of CPI, including housing inflation, airfares, hotel prices, restaurant prices, etc.
The bottom line is that if the Fed, instead of focusing on the overall CPI index, decides to put less weight on housing inflation, auto insurance, and hospital services, it runs the risk that Fed communication about what is important and what is not important becomes very difficult. This challenge is particularly difficult when the Fed is already being asked why it puts no weight on inflation in food and energy.
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