The Bureau of Labor Statistics May inflation report released this morning showed that prices in May rose just 0.1 percent. That's 1.2 percent on an annualized basis. Annualized inflation has risen just 2.4 percent in the last 3 months and 2.75 percent in the past six months.

The economy has hit a sweet spot where it keeps generating jobs—another 339,000 in May—but the inflation created by supply shortages during the pandemic is just about gone. The economy is close to full employment. But because of the weakness of the labor movement after decades of attacks by industry, workers in most sectors lack the bargaining power to get raises beyond the inflation rate, if that.

The more you drill down, the better the inflation picture looks. Apartment rental costs have subsided and are now up less than 2 percent over the 12 months ended in May compared to double-digit increases a year ago. Gasoline prices declined 5.6 percent in May from April, and other energy prices also dropped. Costs of food consumed at home also subsided, increasing just 0.1 percent in May. In short, a normal economy.

The inflation rate should be under 3 percent for all of 2023. To get it below that using more rate hikes, in the hope of reaching the Fed's entirely arbitrary target of 2 percent, would create a needless recession.

The Fed has now raised interest rates ten times between March 2022 to May 2023. The rate hikes have reached a point where high interest rates themselves are now a prime cause of inflation, increasing the costs of mortgage payments and other borrowing costs.

As the Federal Open Market Committee meets this week, some Fed officials such as Raphael Bostic, president of the Atlanta Fed, have called for a “pause” in the Fed's relentless drive to crush the economy. A pause in the rate hikes would be welcome. A cut in rates would be even better.

Jay Powell could be remembered as the Fed Chair who understood just when to take his foot off the brake; or as the obsessive who needlessly strangled the economy out of a determination to hit a target that makes no economic sense.