Yesterdays CPI todays fomc Some mid term thoughts….
This morning and yesterday i anticipated a marginal move down in the CPI number and that’s exactly what we got it was a wide market belief 😂
Lets dig into the detail and outline some short / mid term expectations…
FOMC today :
I expect Powell will still come out tomorrow Hawkish. Almost certain of it. I also expect he will signal that he will look to keep rates ‘’higher for longer’’ – Maybe more than what the market expects.
So recession fears haven’t gone away here guys on a 0.1/0.2% drop in the CPI… And this was anticipated all along. A shift away from inflation fears to recession fears. So tomorrow I’ll be on the look out for this.
DIGGING INTO THE CPI:
So this is where I think people are going to be blindsided BIG TIME.
Reviewing the CPI in detail here we can see that the majority of the declines were led by ENERGY. Energy has declined heavily due to demand concerns – When you’re faced with a recession demand reduces so energy has taken a further hit and has helped the CPI massively here.
Housing prices still went up 0.6% and remains sticky. Same goes for Food.
Watch what happens with Energy over the next 24 hours / or even after FOMC if Powell missteps and markets continue to rise. Already natural gas is up nearly 8% - Oil up nearly 8% since yesterday.
That means these healthy drops in energy that have helped with yesterdays CPI will HINDER the next print and before you know it we have a really nasty CPI / Inflation surprise print on the next reading.
In other words this is still the ultimate suckers rally until proven otherwise. I would need to see housing and food down heavier to change my mind.
