I’m not sure I’d call Wednesday’s all-important inflation update out of the US “comforting.”

Although markets will surely trade the optically encouraging undershoot on the core measure, which rose 0.225% unrounded last month from November, the coolest readout in months, pockets of inflation remain and I’d argue the risks are still skewed to the warm side, particularly in light of fiscal and geopolitical realities.

To be sure, the Fed will take any incremental good news they can get no matter how many caveats are attached, and in that regard, the downshift in core price growth will be welcomed.

The YoY pace for the core measure, at 3.2%, likewise undershot. Economists were looking for a 3.3% advance there.

The headline gauge, meanwhile, rose 0.4% in December from the previous month and 2.9% on a 12-month basis. The fact that the all-items gauge is an afterthought on Wall Street and also among policymakers even as food and energy, along with shelter, are in some respects all that matter on Main Street, is a testament to why regular people don’t trust “the establishment.”

Nearly half of the gain on the all-items gauge was attributable to the energy index, which rose 2.6% from November, the largest month-to-month gain since August of 2023. The food gauge, meanwhile, rose 0.3% and grocery prices by the same amount. To be fair, both of those gauges are running at tolerable levels on an annual basis again, depending on your definition of “tolerable” and forgetting that the price level for pretty much everything on the shelves is sharply higher versus 2019.

Shelter’s stubborn. There’s really no way around that. OER bounced in December to post a 0.3% MoM gain after notching the slowest sequential pace since January of 2021 during November. On a YoY basis, the gain was 4.8%.

The figure above’s pretty tortured: It uses two different y-axes and a 12-month lag for the BLS’s shelter gauge, but the overarching point is just that although the annual pace of shelter inflation in the US has obviously decelerated sharply, it’s still well above levels observed prior to the pandemic housing boom (which, we shouldn’t forget, was exacerbated by the Fed’s MBS buying).

But, again, if you strip out energy, food and shelter, and narrow your focus to services, you come away with a 0.205% monthly pace for consumer price growth. That was the implied MoM pace for a CPI-derived version of the so-called “supercore” calculation for December, and it’ll embolden traders and allay some fears at the Fed.

I’m (very) reluctant to traffic in obvious jokes and tired clichés, but… well, if you don’t need energy, food or a roof over your head, inflation’s benign in the US.

I’ll leave you with my favorite quote from Jerome Powell who, in May of 2022, during his first in-person, post-FOMC press conference since the public health crisis, insisted the Fed understands what it’s like to be a “normal economic person”:

If you’re a normal economic person, then you probably don’t have that much extra to spend. And it’s immediately hitting your spending on groceries, on, you know, on gasoline, on energy, and things like that. So we understand the pain involved. So how do you get out of that? And it’s our job to make sure that inflation of that unpleasant, high nature doesn’t get entrenched in the economy. That’s what we’re here for, one of the main things we’re here for—perhaps the most fundamental thing we’re here for.