Inflation as a monetary phenomenon?

Playing with this idea that inflation is always and everywhere a monetary phenomenon… one would expect a very high correlation between the federal funds rate and the inflation rate. Also for shits and giggles let’s throw in the price of energy in the United States.

Here are my correlation coefficients:

CPI Energy Fed Funds
CPI 0.699622 0.714027
Energy 0.282622
Fed Funds

and what if we put in a 6 month lag?

CPI Energy Fed Funds
CPI 0.467863 0.717891
Energy 0.282622
Fed Funds

Now… I don’t want to be brash here… but when I see a correlation of 70%, I don’t immediately think it must be a causal relationship like Milton Friedman claims. I think such claims are wrong, and this data shows that inflation cannot be an inherently monetary phenomenon.

Source:

https://fred.stlouisfed.org/graph/?g=VxU2

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