Summary: Over the last 12 months, the CPI-U increased +9.1% (the largest increase since November 1981). On a year/year basis, June’s CPI increased +24% y/y which makes it look much worse (see chart below). This provides fodder for the Fed to continue raising its Fed Funds rate (the interest rate at which banks lend reserves to each other) as it targets getting to 3.5% this year (up from 1.58% currently). This will have the effect of sharply raising interest rates for bank loans, thus cooling economic growth. However, who has ever heard of forcing interest rates higher during an economic downturn? Yet that is exactly what the Fed is up to as the 2Q22 GDP fell -1.9% after falling -1.6% during 1Q22 (just revised down from -1.4%). The million-dollar question: how do higher interest rates tame inflation by increasing the supply of gas & food? Answer: it does not! Obviously, today’s inflation is not caused by excessive demand (with a shrinking GDP) but by a supply shortage which the government must address if we are to tame inflation without causing another great depression.