Economy isn't seeing the kind of inflation the Fed could impact, says Wells Fargo's Tom Porcelli

Summary

Wells Fargo chief economist Tom Porcelli argues the Fed should hold rates steady because current inflation stems from supply shocks that are beyond monetary policy's reach. He notes core CPI is near 2.2% on a three-month annualized basis and dismisses calls to hike rates based on copper price signals.

• Tom Porcelli expects the Fed to remain on hold, not hike rates.
• Inflation is driven by tariffs, energy supply shocks, and past auto insurance spikes.
• Rate hikes would have only a modest impact on supply-side inflation while hurting growth.
• Core CPI is running at a 2.5% year-over-year pace, with a recent three-month trend of 2.2%.
• The divergence between CPI and PCE is due to different weightings, not underlying inflation risks.
• Porcelli rejects the idea that elevated copper prices require higher rates, citing durable goods' long-term deflationary trend.