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U.S. inflation cools again, giving Fed room to downshift on rates
- chrononaut 4y agohttps://archive.ph/V8Gsd https://archive.ph/V8Gsd
- jollyllama 4y ago>Excluding food and energy
- erellsworth 4y agoYeah, but who uses those?
- shmatt 4y ago* 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
- lettergram 4y ago1. There are things like “shrink-flation” not captured. I’ve noticed most packaged goods have reduced in size 10-20%. Eggs have more than doubled, milk is up 25%, etc I don’t care what the government publishes. My friends around the country all confirm this. My own bills (I track itemized) show it as well. Though, to your point, much of the increase occurred in 2021 - it just never came down. 2. Fuel is only down because the US has used its strategic reserve to increase supply. At the same time demand dropped dramatically, with China lockdowns & increased prices forcing manufacturing / transportation to cease. Now the election season is over I suspect the strategic reserve will stop being drained; further if price caps work on Russia… we will see a massive reduction in the global fuel supply (Russia will just stop pumping as its unprofitable).
- roywiggins 4y ago> much of the increase occurred in 2021 - it just never came down. That's not actually in disagreement with the notion that inflation has come down a lot. (for prices to come down you'd need deflation)
- NikolaNovak 4y agoThis is a key point and massive misunderstanding in everybody I know : there's this expectation that when "inflation slows down", then "prices will return to normal". But that's empathically not what it means. If prices rose whatever percent last 18 months, and inflation drops to zero tomorrow... Prices will stay exactly the same. They just won't increase further day to day any more (at zero inflation). "Inflation is still high, I know that because prices are still up compared to before " is a logical error.
- lettergram 4y agoThe real struggle is the government - fed, treasury, etc all claimed the inflation was “transitory”. A lot of people have been caught off guard. Aka people expected a deflation. I was pointing out most of the increase the last 3 years occurred in 2021. I actually believe 2022 has far higher inflation than they claim in government figures. At least locally, it’s higher based on my tracking. 2023 will be worse for food due to fertilizer issues, I suspect fuel prices will also increase. Effectively, expect more expensive commodities. That said I’d suspect housing and other goods being kept up with loans to decrease. For fertilizers - it takes ~10 years to get potassium online, for instance. The other chemicals take 3-5 years, so we shall see how this goes.
- ceejayoz 4y ago> fed, treasury, etc all claimed the inflation was “transitory” That is precisely what "Core measure rose 0.3% in December" means. The period of high inflation is (apparently) over. The price increases that inflation generated will tend to stick around.
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- jollyllama 4y agoGet real. Have you bought eggs or butter lately? Random shoppers are literally exclaiming about the price of butter in the store.
- roywiggins 4y agoHow much of the average shopper's budget is eggs? If it's not that big a percentage then you're just not going to see it in the overall inflation rate, and you wouldn't expect to.
- smileysteve 4y agoEggs are significant ingredient in many homemade things (eggs, bread, pancakes, pastas, brownies) and one of the cheapest,cleanest protein sources in the American diet. The Aivian flu + inflation caused a carton of 18 eggs to increase in price more than 50% recently (<$5 to > $7.50). My household has fought this increase by increasing mushrooms and spinach in our eggs, and recently hybridizing with liquid egg whites.
- throw0101a 4y ago> Eggs are significant ingredient in many homemade things (eggs, bread, pancakes, pastas, brownies) and one of the cheapest,cleanest protein sources in the American diet. Yes, and food makes up ~13% of the BLS CPI. This is taken into account when they do their surveys to see what people are spending their money on: * https://en.wikipedia.org/wiki/Consumer_Expenditure_Survey https://en.wikipedia.org/wiki/Consumer_Expenditure_Survey Remember that the CPI is the national average inflation for an average basket of goods, and not your personal inflation. In Canada, StatCan actually has a personal CPI tool so that you can see how things are for your personal basket of goods: * https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015-eng.htm https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015...
- smileysteve 4y agoI'm not questioning the survey results, I am challenging the lack of importance of eggs.
- vondur 4y agoHa. Our natural gas bills in my area doubled this month.
- UncleMeat 4y agoNo fun for you, but nationwide piped gas went up 3%, not 100%. Your cost per unit (not overall gas bill) doubled in december? What gas provider do you have?
- Damogran6 4y agoThere 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'.
- endisneigh 4y agonot 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?
- ethanbond 4y agoYoY is comparing Jan 2021 to Jan 2022. What’s the reset?
- endisneigh 4y agoInflation spiked and is going down. The nature of YoY changes is such that even if prices stayed the same (not inflation, which is inherently 2nd order) inflation will go down. Hence, the reset. If you consider COVID an anomaly, which it is, this is the natural conclusion, which we're now seeing. in any case, I adjusted the comment to clarify
- Supermancho 4y ago> will the Fed stop raising rates soon enough? This is not a meaningful phrase.
- ceejayoz 4y agoWhy not? It's entirely possible to overcorrect. https://www.reuters.com/markets/us/feds-delayed-inflation-fight-sparks-fears-policy-overcorrection-2022-10-05/ https://www.reuters.com/markets/us/feds-delayed-inflation-fi...
- GalenErso 4y agoThe 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 4y agoAlso 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.
- UncleMeat 4y agoMonthly inflation in December was -0.1%.
- newaccount2021 4y ago[dead]
- alexb_ 4y ago>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 4y agoYoY is at 6.5%, but the last six months annualized is 1.8%. The YoY numbers are rapidly becoming misleading.
- cpursley 4y agoI 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 4y agoHeadline 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
- fundad 4y agoWe are going to hear about “recession” fears from the corporations who continue raising prices by 6%
- oneoff786 4y agoThe fact that inflation has been around 2% for the past several months means they are already not doing this.
- dannyz 4y agoAnnualized 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 4y agoAs would almost all traders. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html https://www.cmegroup.com/markets/interest-rates/cme-fedwatch... For context: https://www.macrotrends.net/2015/fed-funds-rate-historical-chart https://www.macrotrends.net/2015/fed-funds-rate-historical-c...
- f5ve 4y agoDo 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.
- markus_zhang 4y agoTo me the data is more or less meaningless. I keep a notebook of my own inflation record for food and fuel.
- ryhn22 4y agoCan 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?
- markus_zhang 4y agoIt's meaningless because every individual follows his or her own life. For example, getting a new house might increase your rent while the "average" rent drops. What I'm trying to say is, unless for investment or research, these data doesn't have much to do with we as individuals. You can see people arguing that "You all feel X goes up but I don't feel that", and I'm just saying the same thing but from a different perspective.
- pwinnski 4y agoMostly people arguing that the numbers are "wrong" are misunderstanding what low inflation means. Low inflation means prices won't continue to rise. It does not mean that prices will come down. The prices you remember from two years ago, they're gone. They're not even considered when calculating inflation numbers now.
- markus_zhang 4y agoTrue, but price fluctuations are still "individual" things, when we consider the cost. The CPI is at best a very vague/inaccurate number for personal financial planning. Looking at one's bills are far more useful.
- starkd 4y agoNobody was claiming CPI was for looking at personal financial planning. It is about the larger economy that in turn effects individuals.
- deleted 4y ago[deleted]
- theknocker 4y ago[dead]
- rank0 4y agoCash 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 4y agoThe 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.
- rank0 4y agoPeople have strong opinions about the economy without understanding monetary policy. It doesn’t take a genius to observe cash is GUARANTEED to loose value. In the current environment it’s the least safe asset…it just doesn’t have the same volatility to it!
- dragonwriter 4y agoNote 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 4y agoFor context: https://en.wikipedia.org/wiki/Personal_consumption_expenditures_price_index https://en.wikipedia.org/wiki/Personal_consumption_expenditu...
- raincom 4y agoOf course, the investing class is front running the fed. That's why the financial press always wants to push Fed to lower rates.