After January’s disappointing ‘stall’ in the linear demise of inflation, consensus expectations were for a re-acceleration of the YoY decline in headline CPI (from 6.4% to 6.0%), and the actual print came in right on expectations (+0.4% MoM, +6.0% YoY). That is the lowest YoY CPI since Sept 2021…
Tl;dr: Headline and Core CPI printed ‘as expected’ (which is likely disappointing for the whisper numbers and remember the last CPI printed ‘cooler than expected’). Goods inflation continues to slow but Services inflation continues to soar (highest in over 40 years). Shelter costs continue to soar.
As mentioned in a previous post, when I have looked at previous right to left, and left to right political swings, they seem to happen globally, and they seem to happen roughly at the same time. A global shift left happened in the 1930s, and kept shifting until 1970s, when it began to shift back to the right. We are now well into a shift back to the left, that began in 2016. As also highlighted, modern democracies are filled with checks and balances to slow political shifts, but they still happen.
It’s that time of the month again. The ‘most important’ CPI print in history, since the last ‘most important’ CPI print, is expected to show some moderation in October data (but remains at extremely high historical levels in both headline and core), and it did just that and then some:
Mortgage rates fell sharply Thursday after a government report showed that inflation had cooled in October, prompting a decline in bond yields.
A key component propping up consumer prices is cooling, but it’s not yet reflected in the government’s inflation measure, according to experts.
While the market’s volatility this week has been focused on UK pension funds and budgets and systemic risk, this morning’s US CPI print will likely determine the next leg from here with expectations for an acceleration in core inflation and small slowdown in headline growth of consumer prices.
The federal government’s Bureau of Labor Statistics released new price inflation data today, and according to the report, September was yet another month of soaring inflation.
Investors globally are wondering – after CPI sent the ‘peak inflation’ narrative to the bottom of the ocean and Powell’s Jackson Hole speech (and this FOMC statement and press conference) crushed the ‘Fed Pivot’ narrative – what other potential indicators/signals (aside from a multi-month slowdown in inflation of course) could prompt Powell and his pals to back off their uber-hawkishness?
Expectations for a 0.1% MoM drop in CPI has set the squeeze-algos on fire in recent days as the small drop signals ‘peak inflation’ and goldilocks and a unicorn-filled Fed will step back and declare victory (with a lag). Short-term interest-rates – however – have not been buying that dovish story, so how the market reacts to today’s print will be fascinating given the technical background of extreme negative delta and positioning, and now momentum. The market was pricing in a 90% chance of a 75bps hike by The Fed next week ahead of the CPI print.