U.S. inflation cools again, giving Fed room to downshift on rates

[chrononaut]

https://archive.ph/V8Gsd

[alexb_]

>The data, when paired with prior months’ lower-than-expected readings, point to more consistent signs that inflation is easing and may pave the way for the Fed to downshift to a quarter-point hike at their next meeting ending Feb. 1.

I hope not. There's an absurd amount of dumb money floating around, and YoY inflation is still at 6.5%. Higher interest rates are going to force companies and investors to actually post profits instead of functioning as giant leeches on the economy.

[UncleMeat]

YoY is at 6.5%, but the last six months annualized is 1.8%. The YoY numbers are rapidly becoming misleading.

[cpursley]

I tend to agree.

And in the housing market as well. All sorts of silly things have happened with home prices due to all the cheap money.

[hammock]

Headline and Core CPI printed 'as expected' however Services CPI soared to the highest in 40 years, real wages shrank for the 21st month in a row and housing costs continue to soar

[dragonwriter]

Note this is CPI, which is not the measure the Fed uses for gauging inflation.

The Fed uses PCE. It is likely to behave similarly to CPI, though part of the reason the Fed has been as aggressive as long as it has is that PCE diverged more than is historically common from CPI during the inflation spike, spiking higher and coming down more slowly..

[lotsofpulp]

For context:

https://en.wikipedia.org/wiki/Personal_consumption_expenditu...

[dannyz]

Annualized over the last 6 months inflation is now under the 2% target. I would be surprised if we see anything more than a quarter-point at the next meeting.

[lotsofpulp]

As would almost all traders.

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...

For context:

https://www.macrotrends.net/2015/fed-funds-rate-historical-c...

[f5ve]

Do you have a source for this?

I couldn't find this particular piece of data published anywhere, but I did a little math and arrived at an annualized rate of inflation for the last 6 months of 5.85%, well above the 2% target.

[raincom]

Of course, the investing class is front running the fed. That's why the financial press always wants to push Fed to lower rates.

[rank0]

Cash is trash. It’s headed toward zero in the long run.

They’ve barely unwound any of the Feds balance sheet. I think it’s ridiculous for the markets to assume the fight is over and position for a pivot.

Imagine what would happen if the fed started selling $100B+ in treasuries per month. EVENTUALLY we’re gonna have to address that plus our enormous congressional deficit.

[starkd]

The fact you are getting downvoted is simply amazing to me. It shows people are just not ready to look at reality of budgeting. People are honestly under the illusion that debt is just a number and can never get too high. Nothing is forever.

[GalenErso]

The Fed can't lower rates if only because it needs to maintain its credibility. The financial press has been cranking out opinion pieces disguised as serious analysis nonstop in an attempt to wish a change of monetary policy into being. If the Fed backs down anytime soon, it could decrease the effectiveness of future increases. The next time the Fed raises rates, consumers, asset holders and businesses can just tell themselves that this increase will be brief and the Fed will soon lower rates. The Fed is engaged in a game of psychological brinkmanship with asset holders and businesses who think they can ride this out. Only when the latter capitulate - by selling houses for lower prices for example - can the Fed begin to consider lowering rates. The Fed needs to hammer home the message that you can't fight the Fed.

[euix]

Also unless the inflation rate goes negative, the actual price of goods is not going down, it's just increasing slower because you had a whole years worth of high inflation. If YoY inflation goes down that just means last year's inflation was already so high, relative to this year we are "only" increasing by 3% or 4%, etc.

In that sense the inflation is now baked in, and we only make future increases slower but we don't unwind back to the original price without some serious deflation.

[jollyllama]

>Excluding food and energy

[shmatt]

* Food at home +0.2%, smallest since March 2021

* Fuel oil -16.6%, biggest decline since February 1990

Seems important to point out to anyone reading your comment

[Damogran6]

There are other knock-on effects....avian flu, weird hiccups in the supply chain. I'm curious to see how this will affect day to day stuff as so many thing I run into just get filed under 'the times we live in'.

[erellsworth]

Yeah, but who uses those?

[fundad]

We are going to hear about “recession” fears from the corporations who continue raising prices by 6%

[oneoff786]

The fact that inflation has been around 2% for the past several months means they are already not doing this.

[endisneigh]

not surprising. now that the covid related spike is far enough in the past I expect inflation to be down drastically since the throttle that was low rates is no longer being pressed on. question is, will the Fed stop raising rates soon enough?

[Supermancho]

> will the Fed stop raising rates soon enough?

This is not a meaningful phrase.

[ethanbond]

YoY is comparing Jan 2021 to Jan 2022. What’s the reset?

[markus_zhang]

To me the data is more or less meaningless. I keep a notebook of my own inflation record for food and fuel.

[ryhn22]

Can you add something to the discussion by either sharing what your records show for you personally or addressing why a large/broad dataset is "meaningless" in the face of your smaller dataset?

[UncleMeat]

Sure, CPI data won't be accurate for a single person. But we also probably shouldn't base monetary policy off of your personal spending.