Monetary Policy

The classical case for a Fed rate hike remains absent. Cyclical pressure within the economy has
increased lately, but remains suppressed with a few indicators such as capacity utilization %
consistent with a mild recession. My short term credit / supply demand reading remains at a
mild +5 in favor of demand, but there is sufficient private sector growth to fund the needs of the
entire real economy with excess to spare. The CPI was up only 0.8% yr/yr through Jul. Moreover,
a key element of my inflation pressure gauge, the yr/yr % change of the CRB commodities
index, has improved from a dramatic -30% seen since early 2015 to a negative 1.05% recently.
The trend of this measure is signaling higher inflation eventually, but it has been a slow rise so
far.  CRB Weekly

Through July of 2016, my proxy for US business sales is up just barely on a yr/yr basis to +0.3%.
In more normal times, when cyclical pressures are on the rise, this measure might be expected to
be 6 - 7% ahead of the prior year.

Ms. Yellen is scheduled to speak next week at the annual KC Fed junket in Jackson Hole, WY.
She probably can get way with an extended rehash of recent Fed views on policy, but unless
she can offer some assurances how nicely the economy is set to perform over the next year, it
would be helpful to develop a wider discussion on further Fed options and the issue of federal
stimulative measures.