Inflation is feelin’ hot, hot, hot!
Although core inflation declined in December (CPI all items less food and energy), it is still hot, hot, hot at 4% Year-over-year (YoY). This raises the following question: Is The Fed tightening too much? Aka, yet another Fed policy error?? Since The Fed target rate is 5.50% and core inflation is now 4%?
Headline Consumer Price Inflation printed hotter than expected in December, +0.3% MoM vs +0.2% exp and +0.1% prior, pushing the YoY headline CPI up to +3.4% (from +3.1% prior and hotter than the +3.2% exp)…
Services (Shelter mostly) costs re-accelerated and energy deflation stalled in December…
On the brighter side, core CPI according to the BLS rose 0.3% MoM as expected, dropping the YoY change below 4.00% for the first time since May 2021…
Goods deflation has stalled as the used cars and trucks index rose 0.5 percent over the month, after rising 1.6 percent in November.
More problematically for The Fed (and the rate-cut ‘hypers’), is the fact that Core CPI Services Ex-Shelter (SuperCore) rose 0.4% MoM, upticking the YoY rise to +4.09%…
This is a category that Fed Chair Jerome Powell and other policymakers have highlighted as a focus.
All the subsectors of SuperCore rose MoM with the shelter index increased 6.2 percent over the last year, accounting for over two thirds of the total increase in the all items less food and energy index.
But shelter inflation is slowing (slowly):
- Shelter inflation was up 6.15% YoY in Dec, down from 6.51% in Nov and the lowest since July 2022
- Rent inflation was up 6.47% YoY in Dec, down from 6.87% in Nov and the lowest since July 2022
And the next time someone from the Biden administration says ‘inflation is down’ in an attempt to gaslight the public into believing ‘prices are down’ – show them this chart…
- Headline costs at record highs
- Core costs are record highs
- Food costs at record highs
- Fuel costs on the rise again
Four of the six major grocery store food group indexes increased over the month.
The index for meats, poultry, fish, and eggs rose 0.5 percent in December, led by an 8.9-percent increase in the index for eggs.
The index for food away from home rose 5.2 percent over the last year.
The index for limited service meals rose 5.9 percent over the last 12 months, and the index for full service meals rose 4.5 percent over the same period.
The White House was quick to note that real hourly earnings was positive in December (+0.8% YoY) but that number is the aggregate of ALL American workers.
If we drill down to the ‘average joe’ – production and non-supervisory jobs – their wages are up 17% since Biden was elected… The only problem is, the cost of food since then has surged almost 21%…
Is this a pause before the re-plunge? M2 thinks so…
Not so much Goldilocks perfection.
Powell is in a real pickle now – does the Fed begin shrinking QT in March (which it has to if it is terminating BTFP and Reverse Repo is drained) without starting rate cuts.
Confounded Interest - Anthony B. Sanders 
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