We get the May CPI report tomorrow, which should continue to show more of the same: tame inflation.

For the Fed, the inflation data has become less important than the inflation threat of tariffs.  So, they are data-dependent, until it doesn’t fit their preferred policy stance.  Now they are forecast driven.  As the San Francisco Fed president said earlier this month, they have to “look forward” to the potential inflation.

This is the Fed using its favorite policy tool to keep a foot on the economic brake pedal, forward guidance.

So, the Fed continues to hold back the economy with overly restrictive policy, in a time that we need hot nominal growth to grow out of the debt problem.

The last time we had this level of debt, (chart above), the economy grew at an average nominal rate of 19% (in the early 1940s).

What could drive that kind of growth?  The AI revolution.

On that note, Sam Altman, founder of OpenAI, penned a blog post today saying, “we are past the event horizon.”  He means AI has now entered an irreversible acceleration, where the machines will start improving themselves.