Canada 68K job loss. Trimmed CPI 1.9% Housing market frozen. Companies leaving for the US Economic elites demand rate hikes. Insanity.

The Fed Is Hiking Into a Mirage What exactly is the Fed tightening against? The Fed’s shifting standards, cutting 50 basis points before an election with trimmed-mean inflation at 2.81%, then hiking with it at 2.28%, make its reaction function look political rather than principled. The Fed has raised rates on the premise that growth remains too strong and inflation risks are broadening. But the composition of the economy tells a different story. The construction boom is overwhelmingly an AI-and-power story. Data centers, grid capacity and related infrastructure are expanding rapidly; outside that complex, residential building, commercial real estate, manufacturing construction and ordinary private investment are weakening. The same is true more broadly: housing, consumer durables, small-business borrowing and credit-sensitive sectors are absorbing the force of restrictive financial conditions, while cash-rich hyperscalers continue to build regardless of a marginal increase in the funds rate. Meanwhile, the Dallas Fed’s trimmed-mean PCE measure, one of the cleanest gauges of persistent underlying inflation, has declined from 2.81% in August 2024, immediately before Powell’s 50-basis-point cut, to 2.28% today. Inflation expectations remain anchored. There is no persuasive evidence of a wage-price spiral, unanchored expectations, or broad second- and third-order inflation effects. The Fed cannot lower oil prices, reverse tariffs, create transformers, expand grid capacity, or alter other supply constraints by raising rates. It can only weaken domestic demand and it will do so most aggressively in sectors already under pressure. The relevant question is therefore not whether headline inflation remains above target. It is whether the Fed is mistaking concentrated, supply-expanding AI investment for generalized excess demand. If so, it is tightening into a negative growth shock, depressing the very rate-sensitive investment needed to broaden productive capacity, while leaving the AI buildout largely untouched. A central bank should not use broad demand destruction to solve relative-price shocks. The Fed needs to show evidence that inflation is propagating through wages, expectations and broad credit growth, not simply point to aggregate GDP inflated by data centers.