In case the blowout June jobs report wasn’t enough to make the forthcoming July Fed cut look silly enough, you can now throw in a hot (or, what counts for “hot” these days) CPI report.
Consumer prices rose 0.1% in June on the headline number, which was more than expected, but the core print jumped 0.3%, the most since January of last year, a truly amusing development in light of the fact that subdued inflation is one of the only plausible justifications for preemptive Fed cuts. The YoY number for core was 2.1%, also ahead of estimates.
“Unfortunately” (when good news is bad news), the gains were pretty broad-based, as prices picked up for used cars, shelter, clothes, home furnishings and medial care. Prices for recreation and airline fares pulled back.
Again, the timing is bad. In one way or another, Powell emphasized repeatedly on Wednesday that his characterization of subdued inflation as “transient” might have been off base. Now, it looks like he might have been correct, just as Goldman (to name one bank) rather loudly suggested. Specifically, Powell on Wednesday flagged “a risk that weak inflation will be even more persistent than we currently anticipate”, and, as alluded to above, the case for so-called “insurance” cuts rests in no small part on inflation remaining anchored.
“Worse” (and, again, the scare quotes are there because right now, good news is “bad”, to the extent it undercuts the case for monetary accommodation), jobless claims dropped to the lowest since April on Thursday.
There was no shortage of sarcastic derision from the finance/econ social media crowd.
“Lol, second-strongest MoM core CPI print this cycle, Fed gotta cut”, Bespoke’s George Pearkes wrote, on the way to shouting out “#TeamTransitory” and posting a picture of Vince Carter’s famous “over-the-top” dunk.
“Core CPI printed a 2-handle for the 16th straight month. Services inflation ex-energy remains persistently near 3% and now we have a .4% MoM jump in core goods prices”, Bleakley’s Peter Boockvar remarked, adding that “tariffs now filtering thru in almost every single home furnishings category and apparel. Inflation is NOT dead”.
Maybe not, but it was certainly left for dead and that’s what makes this so amusing – especially given that it came just hours ahead of Powell’s encore on Capitol Hill.
Bloomberg’s Cameron Crise hit Powell with the Nelson meme:
The Simpsons does Fed commentaryhttps://t.co/Mju8IersXU
— Cameron Crise (@5thrule) July 11, 2019
In any event, this isn’t going to deter the Fed, although it does mean that 50bp in July is highly unlikely, assuming it was ever on the table to begin with, a notion Jim Bullard has gone out of his way to dispel.
At this point, Jerome Powell is used to being mocked on Twitter. And because the tomato throwing usually emanates from the President of the United States, one assumes he’ll easily shake off a bit of (generally) good-natured jabs from the econ crowd.
“Subdued” inflation is the most misreported financial story of the last decade.
Inflation once it appears, may not be controllable. When the Dollar drops, look out!
and yet the Dow just hit another all-time high…
which “should” not have happened given that equities continue to trade on CB accomodation.
btw still waiting for the presidential tweet taking credit.
Asset inflation that leaves the majority of Americans who do not own stocks behind and makes homes unaffordable for many, stagnant real wages, and now increased consumer prices. And people wonder why populism and anti-Establishment anger are rife.
it’s not the rise of populism that’s surprising (sad as it might be, though).
What never ceases to amaze me is the fact that the anti-establishment anger led people to vote for the epitome of everything they profess to despise.
I still want to refuse to believe that it’s just because he, too, hates brown people.
It’s not you or brown people, as a narcissistic psychopath (some say sociopath, which Putin is)he has no empathy for anyone, save himself and his spawn.
Powell’s previous June caution has now been demonstrated as warrented by today’s increasing inflation numbers. He just ‘blew it’ in Congressional testimony yesterday by setting the stage for his compliance to Trump’s tweeted orders to lower interest rates and lower the dollar so Trump could start an ill-advised currency war to complement his failed tariff war.
The chart shows that one “hot “print doesn’t mean much. Let’s not jump to conclusions just yet.
16 straight months of YOY core prints at 2.0% or higher. I don’t think that’s jumping to conclusions based on one print…