Latest Inflation Numbers and Discussion

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OTOH, oil prices seem headed over $80.

Demand from China is said to be increasing, finally as it was anticipated when it reopened.
 
I think July hike is a go at this point. Powell dislikes changing what he has signalled.

But yes there are voices saying July could be the last.

If the market believes this equities will rally as will bonds. Yields will fall.

The average time between last raise and first cut is 6-9 months (from memory). So we would see much lower rates in 2024 if this is the path.

If so it seems now could be the 4th best time to buy bonds this cycle:

Best: last Oct/Nov
2nd Best: March CD sale
3rd: last 2-3 Weeks Fed hawkish rhetoric
4th: before the Fed pauses again

Whatever happens, a new spate of hawkish Fed rhetoric could create brief opportunities
 
Montecfo said:
PPI came in at an exceeding low 0. 1% for June versus 0.4% expected.

The year over year rate was a shockingly low 1.1% versus 1.5% forecast.

What is next? Actual deflation producer prices? These have fallen hard.

"United States Producer Price Index (PPI) YoY"

http://www.investing.com/economic-calendar/ppi-734
Click to expand...

IF there is actual deflation, I'm sure the FED will have a conniption fit. But I wouldn't mind some prices going down for a while.:popcorn:
 
Trying to grok PPI gives me a headache.
 
Careful with the sentiment that inflation is behind us... this is the last month that last years spike in inflation is rolling off the trailing 12 month. That is the say... 1.2% of the drop in headline inflation year over year was due to the surge from May to June 2022 of 1.2%... the change in inflation from June to July 2022 dropped to 0.0%

What this means is that inflation coming down this fall is going to be very difficult. We've had a rather persistent month by month inflation of 0.3-0.4% ... way way above the annual 2% goal (which would require less than half that monthly rate). I would be shocked if Powell doesn't raise it at least another 0.75-1.5% total before end of 2023... and who knows what that'll break.

Sort of a perfect storm coming with next months numbers... as headline inflation will go up if month over month inflation is above 0.0% (it will be)... month over month was 0.2% this month.
 
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I do not think it is behind us. I do think rate hikes mostly are.

Services inflation needs to be slain.

I will be shocked if we get more than two more hikes this year. BUT if I did expect that, I might buy the TLT. Point being more aggressive Fed action suggests they will not stop until they kill job growth. If they kill job growth they will have to cut sooner and rates across the board will be down to down sharply.

So Fed mostly done= lower rates near term.

Fed not mostly done= lower rates in the intermediate term.

So what I am seeing is lower rates.
 
found the chart... about half way down the page https://www.usinflationcalculator.com/inflation/current-inflation-rates/

Inflation has been between 0.5 to 0.6 every 2 months (0.3% Month over Month average; double their goal) since last summer when it had the sharp drop from early 2022 MoM numbers of 1% or higher.

So in the last 12 months, despite the massive increase in rates, inflation month by month hasn't really budged significantly lower since June of 2022. I think the Fed has a lot of work left to do, unless some kind of other event causes these numbers to come down drastically without them raising rates significantly higher.
 
EvrClrx311 said:
found the chart... about half way down the page https://www.usinflationcalculator.com/inflation/current-inflation-rates/

Inflation has been between 0.5 to 0.6 every 2 months (0.3% Month over Month average; double their goal) since last summer when it had the sharp drop from early 2022 MoM numbers of 1% or higher.

So in the last 12 months, despite the massive increase in rates, inflation month by month hasn't really budged significantly lower since June of 2022. I think the Fed has a lot of work left to do, unless some kind of other event causes these numbers to come down drastically without them raising rates significantly higher.
Click to expand...

It does get somewhat harder from here on the annual figure. But the path is still encouraging. Particularly the past two months which 0.1 and 0.2, respectively or under 2% annualized. The PPI trend is also very encouraging.

The Fed has raised rates 350 basis points in the past 12 months. Those hikes still need time to percolate through the economy.
 
USGrant1962 said:
Interesting chart. So 500 basis points is child's play compared to 1972 (~1000 BP) or 1977 (~1300 BP). And 1981 went up ~1000 BP in six months! :hide:
Click to expand...


Yes. Back then one could buy 10 year treasuries yielding double digits. IIRC, some of them were as high as 14% at one point in time Of course, it took the stock market 18 years to regain its losses in real terms. So be careful what you ask for, somebody may give it to you.


Today's rates are average in my life experience. FWIW, 2% inflation is very low, again in my life experience.
 
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Please correct me if I'm wrong.


I've been watching Tom Lee and some others on CNBC being very bullish on equities before this last inflation print because the annualized was dropping the May 2022 and July 2022 high numbers of 0.9% and 1.2% (month over month inflation). Of course we were going to have great annualized numbers when those dropped off but looking forward now that those inflation prints are off the books, July 2022 and Aug 2022 were only 0.0% and 0.2%. Aren't we in a setup for a bump up in inflation readings if the next 2 inflation prints come in anywhere above that? Especially with what looks like a revitalized housing market and upswing in commodities? If so, in my heavily inexperienced mind that would seem to be bad for the market but possibly another good buying opportunity for fixed income.


I need help looking at this correctly because in my mind it looks like the great setup we've had these past 2 months will be the exact opposite setup the next two months. If this isn't correct, I'd like to know so I can lock in more long duration now.
 
dobig said:
Please correct me if I'm wrong.

I've been watching Tom Lee and some others on CNBC being very bullish on equities before this last inflation print because the annualized was dropping the May 2022 and July 2022 high numbers of 0.9% and 1.2% (month over month inflation). Of course we were going to have great annualized numbers when those dropped off but looking forward now that those inflation prints are off the books, July 2022 and Aug 2022 were only 0.0% and 0.2%. Aren't we in a setup for a bump up in inflation readings if the next 2 inflation prints come in anywhere above that? Especially with what looks like a revitalized housing market and upswing in commodities? If so, in my heavily inexperienced mind that would seem to be bad for the market but possibly another good buying opportunity for fixed income.

I need help looking at this correctly because in my mind it looks like the great setup we've had these past 2 months will be the exact opposite setup the next two months. If this isn't correct, I'd like to know so I can lock in more long duration now.
Click to expand...

What you are describing is base effects. We went through this on the ramp up last year too.

What I find about inflation discussions is that people have their point of view and will use the specific inflation measurement to support that POV. Some of this is political, some of it is just a differing idea.

Some of it is being an "influencer," with the intent to sway people in a way that moves inflation in a certain direction. For instance, if the narrative is nothing but talk about high inflation, there are concerns it gets "baked in," so some influencers will try to temper that discussion to calm the psychology and avoid a bake-in, so perhaps people will stay calm and watch for a drop. This has a lot of merit -- as long as you are are not "Baghdad Bob" or "Chicken Little" in your narrative.
 
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dobig said:
Please correct me if I'm wrong.

I need help looking at this correctly because in my mind it looks like the great setup we've had these past 2 months will be the exact opposite setup the next two months. If this isn't correct, I'd like to know so I can lock in more long duration now.
Click to expand...

Well, not to the same degree but we are setting up for more rises in the annual figure, even if the monthly figure performs as it did this month. But it will not be dramatic as long as the July/August numbers are similar to June.

It looks to me like absent a spike, we might be looking at 3.3-3.7% on the annual figure assuming the monthly figure is like we just had.
Not sure that is actionable.

But if inflation spikes higher all bets are off as we move toward the end of 2023 since there were some other declines in fall of 2022.

I think the Fed would like to see less volatility for sure.
 
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Trying to predict inflation is too difficult for me. And from what I have seen it’s also difficult for the various experts.

IMO, diversity is my friend. I keep a good non callable bond/CD ladder, an SP500 index fund, and some tips and Ibonds. If you see a spike in interest rates on bad news buy a little more if I have the funds. I might buy callable bonds and CDs if the premium for the risk is at least 1.00%, preferably more. Callable bonds/CDs add an additional layer of risk on what for me should be a secure investment, so I keep them to a minority of any step on my bond ladder that has them.

This is just my 2¢. YMMV.
 
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A low interest auto loan is one way to fight inflation. Current best deals on auto loans.
 

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Chuckanut said:
A low interest auto loan is one way to fight inflation. Current best deals on auto loans.
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My 2006 Lexus LS 430 was just totaled (today, as a matter of fact), and I'm looking for Toyota deals for my next vehicle. Please keep me posted. Ha!


I have my eye on a Toyota Sienna hybrid. Toyota currently has some interest rate deals (not great ones, though) but not for the Sienna.
 
Involuntary Retiree said:
My 2006 Lexus LS 430 was just totaled (today, as a matter of fact), and I'm looking for Toyota deals for my next vehicle. Please keep me posted. Ha!


I have my eye on a Toyota Sienna hybrid. Toyota currently has some interest rate deals (not great ones, though) but not for the Sienna.
Click to expand...
You have chosen the brand with the tightest supply, still. In that brand, you have chosen the most popular style (hybrid).

Sienna and RAV4 hybrids are very hard to get.

Good luck. I'm hoping we'll finally see Toyota supply show meaningful increases by first of year.

Other brands have expanded supply significantly. Stelantis supply is up. Dealers will deal, but they're first bluffing that the crisis is still on.
 
Involuntary Retiree said:
My 2006 Lexus LS 430 was just totaled (today, as a matter of fact), and I'm looking for Toyota deals for my next vehicle. Please keep me posted. Ha!


I have my eye on a Toyota Sienna hybrid. Toyota currently has some interest rate deals (not great ones, though) but not for the Sienna.
Click to expand...


According to the CarDealershipGuy, new Siennas are just slightly less rare than Dodo birds. Dealers are marking them up big time and the wait is still long. IOW, it’s not a good time to buy a Sienna unless you really want to Blow That Dough.

https://dealershipguy.com

Perhaps wait for the long predicted and long delayed recession? I don’t know.
 
next door neighbor flew from Houston to Mobile (I think, at least somewhere in Alabama) to get a Camry. Dealers in Houston would not come off sticker price, Alabama came off $4,500 bucks on a 23 Camry. May just be a onetime thing. But you might try some dealers a ways away. He paid for the air fair and trip back and still had about three grand or so left over.
 
Fed raised another 25 bp. Otherwise comments pretty much unchanged. Noncommittal on future hikes or amounts.

This is a good thing.
 
Fed Hikes by 25 Basis Points, to 5.5% Top of Range, Highest since 2001, More Rate Hikes on the Table. QT Continues

by Wolf Richter • Jul 26, 2023 •

“In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time…”
By Wolf Richter for WOLF STREET.

The Fed’s FOMC raised its five policy rates by 25 basis points today, which pushed the upper limit of its policy rates to 5.5%, the highest since January 2001. The Fed had broadly telegraphed this move after the “very hawkish skip” meeting in June, when it projected two more rate hikes this year. The Fed has hiked by 525 basis points in 16 months, the fastest rate-hike cycle since 1980, to deal with the worst inflation in 40 years. The vote was unanimous.

And the Fed also put another rate hike on the table for this year.
Click to expand...


https://wolfstreet.com/2023/07/26/f...01-more-rate-hikes-on-the-table-qt-continues/
 
The author of that piece takes quite a bit of license.

Powell said no decision has been made about future hikes in his comments. And his comments often include reference to the data e.g., "we could possibly hike in September if the data warranted. We could also hold steady".

The Fed does not know what it will do in future meetings since it cannot predict the data.

And he said nothing about going to 6% as the piece suggests.
 
The Fed's favored inflation gauge, the PCE deflator, rose just 3% annually in June, down sharply from 3.8% in May and the lowest level in more than two years.

The employment cost index came in below expectations at just 1% suggesting wage inflation is moderating.

Treasury yield are down across the board this am.

Key Fed inflation rate falls to lowest annual rate in nearly 2 years

https://www.cnbc.com/2023/07/28/pce-inflation-june-2023-.html?__source=androidappshare
 
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