Fed Losing Cred; Bull Market in Complacency Might Crack: Best of Kass

NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.

Last week, Kass wrote about how the Fed is ignoring the metrics that are supposed to determine central bank policy, and how the market has practically no concern about negative outcomes.

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Fed Losing Cred

Originally published on Thursday, June 19, at 7:40 a.m. EDT.

Liesman: There's every reason to expect, Madam Chair, that the PCE inflation rate, which is followed by the Fed, looks likely to exceed your 2016 consensus forecast next week. Does this suggest that the Federal Reserve is behind the curve on inflation? And what tolerance is there for higher inflation at the Federal Reserve? And if it's above the 2% target, then how is that not kind of blowing through a target the same way you blew through the 6.5% unemployment target, in that they become these soft targets? Thanks.

Yellen: So I think recent readings on, for example, the CPI index have been a bit on the high side, but I think it's -- the data that we're seeing is noisy.

I think it's important to remember that, broadly speaking, inflation is evolving in line with the committee's expectations.

The committee has expected a gradual return in inflation toward its 2% objective. And I think the recent evidence we have seen, abstracting from the noise, suggests that we are moving back gradually over time toward our 2% objective, and I see things roughly in line with where we expected inflation to be.

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