CPI Inflation Report: Inflation Rises Again in The USA
The CPI inflation report was released today and the rate of inflation continues to go back up. So this is coming straight from the BLS, the Bureau of Labor Statistics. The rate of CPI inflation is now at 2.7%. This is an increase from 2.6% the prior month.
Okay, So I want you to take a look at the chart to see the progress. CPI headline inflation. So take a look. It’s ticking back up.
CPI core inflation is stalling at 3.3%. So there’s been no change from the previous month. So the Federal Reserve is trying to get here to 2%. Regardless of whether you measure inflation by CPI or PC headliner core, that’s the targets.
The question is, is that achievable with them already loosening up monetary policy? Now, I want to show you this. This is very interesting. So before the inflation report was released this morning, here were the odds of the Federal Reserve cutting interest rates at their next meeting.
So their next meeting is on December 18, which is next week, Wednesday. There was an 85.8% chance that the Federal Reserve will cut rates at that meeting. So that’s according to the CME Fed Watch Tool. Now, after the inflation report was released, here are the updated odds.
The odds have now increased from 85.8% to a 94.7% chance that they cut rates next week. Okay, so the reason why market expectations have actually increased is for two reasons. So the first reason is, okay, why is the Federal Reserve, why are they saying that they want to cut interest rates? What’s the narrative?
It’s because they’re saying they want to cut interest rates to save the labor markets. Right. And the most recent jobs report, it showed that the unemployment rates increased from 4.1% to 4.2%. So they’re pointing at that.
They’re saying, look, there is deterioration in the labor market. So that goes along with their narrative to cut rates. And this inflation report, even though inflation went up, they’re saying that it did not go up more than expectations, it met expectations. So they still believe that they can get inflation down to 2%.
So with those two pieces of the story, the market’s saying, well, you know that that fits the narrative. So they’re going to cut interest rates next week. Now, I want to show you this. The next Federal Reserve meeting after this one in December takes place on January 29th, and it’s the same question, are they going to cut interest rates at that January meeting or not?
Before the inflation report, the most likely scenario was that the Federal Reserve would take A pause in January and not cut interest rates. There was a 67.5% chance of that happening. After the inflation report, the odds of that happening increased to 73.7%. Therefore, that is the most likely scenario as of now.
And honestly, that goes along with the Federal Reserve’s narrative that they want to continue cutting interest rates, but they want to do so in a more gradual way. Now, if you want my opinion, I agree with market expectations. I believe that the Federal Reserve will cut interest rates by a quarter point next week at the December meeting. And I do believe that in January, yes, they will take a pause.
That is most likely. But listen, I want to take you back to his charts. As you can see, I mean, this is troubling. The fight against inflation has been stalling.
It’s clearly evidence. So the question is, is this just a temporary stall or is inflation going to reaccelerate hard? Let me know what you think. And I also wanted to show you this and I would love your opinion.
Is this true? So the Federal Reserve of New York just released their most recent consumer survey just two days ago on December 9th. According to their survey, American households are feeling the best about their finances in nearly five years. So take a look at their chart on household optimism regarding people’s finances.
So essentially, the report says that Americans are more optimistic about their financial situation. So let me know what you think about that. Is this true or is this off? Okay, today I’m keeping it short and sweet.
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