Stagflation Is Back, Baby — And the Fed Has No Idea What To Do About It

Wednesday's US CPI report is dropping into one of the ugliest macro setups in recent memory. Bloomberg economists are penciling in core CPI at 2.4% — which sounds fine until you remember core PCE, the Fed's actual preferred measure, is sitting at 3.1% and has basically refused to move for two years. Inflation above the 2% target for over five years, a jobs report that disappointed, and unemployment drifting into the 4.3–4.4% range. That's not a soft landing. That's stagflation with a fresh coat of paint.

Cleveland Fed President Beth Hammack went on Bloomberg and described all of this with the energy of someone explaining a minor scheduling conflict. The labor market is "stabilizing," monetary policy is "near neutral," and there's "no urgency" for cuts. Meanwhile, businesses are getting squeezed by energy costs, insurance, and producer price pressures — a detail Hammack mentioned with the calm of a person who does not personally pay for groceries. Reddit's r/SecurityAnalysis crowd is busy debating the "SaaSpocalypse" and AI's efficiency trap, which honestly feels appropriate: everyone's running productivity gains while the macro roof is on fire.

And then there's ORCL, down roughly 50% from its September highs, reporting earnings while Wall Street asks the uncomfortable question of whether all this AI capex is ever going to pay off. Spoiler: nobody knows, and the Fed can't cut rates to make the math easier anytime soon.