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September Fed Hike Unlikely After Second Benign CPI Report
US consumer prices rose in line with expectations last month, according to the most important CPI release since... well, since the one before it.
The as-expected prints for July may help allay concerns that the prior month's report was a false dawn.
The June figures were widely heralded as the first convincing evidence that disinflation has finally begun in earnest. If nothing else, Thursday's release didn't argue against that narrative.
Core prices rose 0.2% MoM, and 4.7% YoY, matching estim
and seemingly, the economists’ crystal models’ outputs are closer to reported data – but, a couple of data points, a trend not
The bigger question is whether the Fed actually had anything to do with the inflation moderation we’ve seen so far. I think the answer is “not really.”
I think the Fed was taking action assuming that action was having some kind of impact. At this point it’s becoming clear that it probably only impacted the consumer side of things. The worry should be now that they overtightened and when corporates finally do start to feel the impacts the landing will be so hard that there will be barely and debris left.
Housing supply might actually increase with lower rates because current homeowners with locked in low rate mortgages are not going to choose to sell until rates come back down (unless they have to).
Generally, more supply indicates lower prices…..
This Fed staff paper suggests that shelter inflation may be more or less nil by late 2024.
https://www.frbsf.org/economic-research/publications/economic-letter/2023/august/where-is-shelter-inflation-headed/
I don’t think substantial deflation is likely. Even in the Great Recession, OER never went very negative.