Oh, goody! Noise! (Inflation data)

Oh, goody! CPI at 3% is still higher than the Fed’s 2% target and the June YOY CPI “improvement” is noise, not a trend. But “core” inflation is declining, which matters because nobody uses food or energy.

This “better than expected” CPI change caused bond yields to fall and the financial press to squeal in delight. The options market still expects a fed funds rate in September.



Now, it’s possible that CPI inflation actually is falling. What annoys me is seeing so-called economists confusing noise with signal in a chart with a stable channel.

The Cleveland Fed has confidence that inflation will continue to fall and forecasts 3Q24 Quarterly annualized percent change of 1.89% for CPI and 2.59% for Core CPI.

Fed Chair Powell has said many times that he wants to see inflation stabilize for a sustained period of time before cutting the fed funds rate.

Treasury uses CPI to calculate the inflation adjustment on TIPS and I-Bonds. The Fed prefers the PCE index to the CPI.


It is all about the spin. I used to do a series on this board called “spin cycle”; analysts who make opposite calls, on the same stock, on the same day.

Steve…hype and hysteria rules in Shiny-land


I agree that it’s likely mostly noise, but to be fair, if you look at the last 3 months, they are at 2.3% annualized. That’s pretty good for that 3-month period.


I just wonder what everyone would be saying if it was up .2%. Seems people aren’t happy with it being lower than projected. That just makes me go Hmmmm.



We are getting into price stability. That is why the economists are happy. Rents are coming down. Home prices in many markets are falling. There is a more than reasonable belief we will get into the 2% ballpark sooner rather than later.

Economics is forward-looking. The present pricing actions support a further decline in inflation.