Economists surveyed by Bloomberg expected [sic] headline CPI rose [sic] 8.1% over the prior year in August, a moderation from 8.5% increase seen in July. On a month-over-month basis, CPI is expected to show prices fell 0.1% from July to August, primarily due to continued easing in energy prices. If realized, this would mark the first monthly decline since May 2020.
CPI grew 0.3% in July. That is an annualized rate of 3.6%. If August shows a 0.1% decline, then the annualized rate would be just 2.4% (.3 - .1) x 12).
If the economy was a locomotive, it seems that too much attention is focused on how far we have travelled and not nearly enough focus on our current speed - which is largely the same error the Fed made last year when they failed to adjust rates when inflation first appeared.
Possibly a real need to normalize interest rates…whatever that means. It is not the 1949 period.
Some might say an interest rate that is not negative, but I do not know which yield they are looing at the FF or the ten year.
There is a need to keep pressure on inflation still. The demand in the economy is still extreme. That is the difference in this part of the cycle. The possibly coming recession can be very mild. But equities will take a further hit as overpriced as yields rise.
There is also a problem obviously in housing costs. Just because the hedge funds have been buying in does not make a difference in a buy high sell low reality. Hedges are quietly renowned for screwing up.
Just because the hedge funds have been buying in does not make a difference in a buy high sell low reality. Hedges are quietly renowned for screwing up.
Depends why the hedge funds bought houses in the first place. If it is a fast “in-out”, then it matters what which prices the funds bought and sold. However, if they are doing a “buy and hold”, then they become landlords because they likely intend to rent houses to tenants–which is a long-term investment. At that point, they will be able to depreciate those assets over a long time period while also receiving considerable revenue (deducting ongoing expenses such as taxes, etc) from renters.
Your numbers tell the exact same story I told. From your link:
Personal income increased $47.0 billion (0.2 percent) in July, according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) increased $37.6 billion (0.2 percent) and personal consumption expenditures (PCE) increased $23.7 billion (0.1 percent).
The PCE price index decreased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent (table 9). Real DPI increased 0.3 percent in July and real PCE increased 0.2 percent; goods increased 0.2 percent and services increased 0.2 percent (tables 5 and 7).
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Again, there appears to be no focus on where we ARE and instead way too much focus or how far we have travelled.
The Fed prefers to watch the BEA’s Personal Consumption Expenditures Price Index, Excluding Food and Energy, which is still too high.
What evidence is there to say PCE inflation is too high right now?
Sure, the year-over-year numbers for CPI and PCE might be high, but these are lagging indicators using the trailing 12 months. And we may not know current inflation very well because it’s difficult to measure and might be noisy month-to-month, but that is an issue of uncertainty in the data (and the Fed is quite clear about their caution with data) and is different from asserting current inflation is known to be too high.
The July PCE number decreased 0.1%, ex food and energy it only ticked up 0.1% (https://www.bea.gov/news/2022/personal-income-and-outlays-ju…).
August CPI is expected to be similarly low as mentioned in this thread (CPI and PCE behave similarly).
U.S. housing is slowing. Europe is looking at a big slow down. China is slowing. Commodity prices have fallen. OPEC actually cut production on demand concerns.
The August CPI number could come in higher. We could get more supply shocks that raise prices. But these are unknowns as I write this.
When indications seem otherwise, how do we know that PCE inflation is still too high?