What’s it all mean? Are we at an inflection point in market land now, and the big bull market is over? Probably not just yet. That said, Quad hangovers can indeed extend several days, as traders reposition and rethink their futures roll outs. But make no mistake, the Fed’s statements, along with Bullard’s opinion, has changed the narrative some. We might see a much more volatile next two weeks as they try and square up all of this. Caution is warranted.
Neil Irwin reminded us yesterday morning that a lot of hopes are riding on inflation easing this year. But it hasn’t happened yet—or over the last year.
Consumer prices surged more than expected over the past 12 months, suggesting a bleak outlook for inflation and increasing the likelihood of more than a few interest rate hikes this year.
The CPI (all urban index) rose 7.5% in January over a year ago, the Labor Department reported yesterday—the highest since February 1982. Economists were expecting an increase of 7.2%.
The so-called core CPI, which excludes volatile food and energy prices, increased 6%, compared with the estimate of 5.9%—its highest since August 1982.
Inflation raged on in February, driving consumer price increases to a place we haven’t been to in four decades.
The latest numbers include a paucity of signs that inflation us leveling off, muchless subsiding.
What’s more, they largely exclude the impact of Russia’s invasion on oil, gas and other global commodity prices.
Most economists and WallStreeters, the Biden administration and members of Congress—especially Democrats—have been counting on inflation peaking early this year.
Unfortunately for them—not to mention consumers and businesses—the numbers are suggesting persistently high inflation for the foreseeable future.
The CPI index, it vividly shows how the value of the dollar has steadily dwindled over the last ten years.
As Bloomberg News' Joe Wiesenthal tells us, straightening this line — or at least slowing its downward spiral — is the Fed’s real goal.
Although the U.S. Dollar Index has been inching higher and higher — over the past year, it's risen almost 11%, from 91.05 to its closing today at 100.8 — it's actually been weakening at the fastest pace since the 1980s.
Last fall, aerial drone photos showed dozens of huge, multi-colored container ships backed up outside the Port of LA.
Even then, it looked like inflation was going to be with us for longer than the Fed and many others were predicting at the time.
It’s simply transitory – temporary – they insisted. Turns out, they were wrong, by a long shot.
Inflation, as measured by the Fed’s preferred, if somewhat mythical, metric – the Core Personal Consumption Expenditures Index (i.e., excluding food and energy) – has steadily risen since the pandemic was declared in March 2020.
The core PCE consistently hovered at or below the Fed’s 2% target from late 2008 until the 1st quarter of 2021.
In February 2020, just before the pandemic was declared in the U.S., the core PCE was roughly 1.8%.
Since then, it’s risen every quarter, from its low of 1.0% in Q2 2020 to 5.2% at the end of March 2022 – more than double the Fed’s target.
Of course, the broader core Consumer Price Index (CPI-U) rose an even higher 6.5% in March (8.4% when you include food and energy prices).