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September’s CPI was at 8.2%. The probability of a smaller rate hike, 50 bps, is likely in December FOMC meeting. Also lay-offs among large companies are taken place as business slows, that reduces the upward pressure on labor cost (service cost) and inflation.Consumer prices rose 7.7 percent in the year through October, slower than economists anticipated. Stocks jumped at the sign that the Federal Reserve’s campaign to tame inflation was taking effect.
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https://fred.stlouisfed.org/graph/?g=WhmD
https://stockcharts.com/h-sc/ui?s=TROW&p=D&b=5&g=0&id=p41192372971
Today is just one data point and there is still a way to go. Earning reports indicating business are slowing down, so the market is still not a bargain. The rate hike will continue well into 2023 but at a slower pace.
The chart of the article below indicates energy, food and housing are still the biggest drivers on inflation.
https://cnbc.com/2022/11/10/heres-the-inflation-breakdown-for-october-2022-in-one-chart.html
https://twitter.com/JustinWolfers/status/1590703184799883269
https://twitter.com/paulkrugman/status/1590702546322358277
From Fidelity,
https://fidelity.com/news/article/top-news/202211100849RTRSNEWSCOMBINED_KBN2S01F4-OUSBS_1
The last 4 months' CPI changes (these are rounded to one decimal place) give a better picture of current inflation.
July 0.0%
Aug 0.1%
Sept 0.4%
Oct 0.4%
Since the sharp turn in July's reading, annualized inflation has been less than 3%. If you annualize only October or the two higher months' readings, it's still significantly less than year-over-year.
Bond funds rallied hard today, e.g., multisector Ponax +1.76%; core plus Dbltx +1.62%; Treasuries TLT 3.85% and IEF 2.24%. Munis are off the bottom too.
No drawing conclusions from one day's action for me, but there has been a big shift in inflationary pressure that may be getting some attention now. Does it have legs? Quien sabe ...
https://fred.stlouisfed.org/graph/?g=Wj6y
I saw some data that this PCI report has Health Insurance premiums dropping 4% in a month.
That sounds pretty fishy to me
the Wolfers thread is especially interesting
Today's refinement:
https://www.nytimes.com/2022/11/11/opinion/inflation-democrats-midterms.html
https://markets.businessinsider.com/news/stocks/paul-krugman-cpi-inflation-drop-soft-landing-economy-recession-prediction-2022-11
https://www.cnbc.com/2022/11/15/wholesale-prices-rose-0point2percent-in-october-less-than-expected-as-inflation-eases.html
Another month of CPI and PPI improving data would help to slow rate hike in Dec.
https://messaging-custom-newsletters.nytimes.com/template/oakv2?campaign_id=116&emc=edit_pk_20221122&instance_id=78282&nl=paul-krugman&productCode=PK&regi_id=22268089&segment_id=113941&te=1&uri=nyt://newsletter/26c3b230-b724-5875-ba94-2fda5335b0b9&user_id=83d45440ead1d14c2a89a1e7221337d1
https://slate.com/business/2022/11/turkey-prices-thanksgiving-inflation-farm-bureau-debunked-wrong.html
For some states there are rent-controlled laws in place so to limit the rent rises. The wild card are those who don’t have a lease agreement. Fuel and food cost are volatile on monthly basis which are part of the CPI calculation.
https://messaging-custom-newsletters.nytimes.com/template/oakv2?campaign_id=116&emc=edit_pk_20221129&instance_id=78809&nl=paul-krugman&productCode=PK&regi_id=22268089&segment_id=114490&te=1&uri=nyt://newsletter/35d0280f-2d60-5574-a079-e4ddc9ebd964&user_id=83d45440ead1d14c2a89a1e7221337d1
Finally, a pundit with influence points out the significant tradeoffs to raising rates and how ultimately it hurts labor to combat inflation. It puts prices before people’s jobs. Wish more folks said this BEFORE the election: