The Federal Reserve Bank of Boston reports that it constitutes a full 42% of the bottom-line CPI reading. The only thing holding up inflation right now are housing costs and those are in the process of crashing.Īs we’ve pointed out in the Digest, “shelter” (which includes housing and rental costs) is the largest component of the CPI. You may be asking, is it really possible for prices to flatline for the next four months? Or for inflation to return to “normal” by early next year?Ībsolutely. If this trend of flat month-over-month prices continues, then we should return to 2% inflation by March 2024 – in just four months! Prices were flat in October, and the Cleveland Fed’s current estimates see prices falling flat again in November. Looking forward, he points toward data suggesting the final nail in the coffin is on the way: Like Eric, Luke has been calling for inflation’s collapse for months. Why Luke believes the housing market holds the key to inflation’s final death blow So, even though nothing moves in a straight line as Eric suggested, what’s the likelihood that inflation will continue falling and give the Fed the proof they need to put rate cuts into the discussion?įor that answer, let’s turn to our hypergrowth expert, Luke Lango, editor of Innovation Investor. In recent months, various Fed presidents have made it sound as though they’ll require ironclad proof that inflation is vanquished before they would consider rate cuts. Now, this is fantastic news…but only to the extent that Federal Reserve members believe it’s fantastic news. That’s the biggest drop since April of 2020. Whereas forecasts called for a monthly increase of 0.1%, the data showed a decline of 0.5%. Yesterday brought even more evidence of falling inflation with the Producer Price Index. Similarly, the year-over-year number was beneath its estimate. The inflation rate is trending down, and the only thing left to do is to watch it fall.įast forward to Wednesday when inflation fell as Eric predicted.Īs we covered here in the Digest, the October CPI report showed that inflation not only came in under forecasts, but also was flat on the month – a 0% increase. Therefore, the Fed’s handwringing over the recent inflationary uptick is misplaced anxiety. To repeat nothing in the financial markets moves in a straight line. In other words, despite that long-term downward trend, inflation was in an upward march 30% of the time. In the process of collapsing from 14.8% to 1.1% over seven years, the monthly reading for inflation increased 24 times. Period. Nothing in the financial markets ever moves in a straight line, not even the inflation rate.Īs an illustration, Eric highlighted the inflationary period of the 1970s and early 1980s. But some of these policymakers cite the recent uptick in the inflation rate as a cause for concern. Inflation has dropped precipitously during the last 12 months, which should provide some comfort to the policymakers at the Fed.
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