Yahoo Finance: Inflation data arrives at critical moment for Fed after bank failures, jobs data..

[progree]

1. A 0.4% rise in both the core and the full CPI will raise the rolling 3 month average

Last edited Thu Mar 23, 2023, 05:54 PM - Edit history (1)

Over the prior month, consumer prices are expected to have risen 0.4% in February, down from the 0.5% monthly increase seen in the year's first month.

On a "core" basis, which strips out the more volatile costs of food and gas, prices in February are expected to have risen 0.4% over the prior month and 5.5% over last year, according to Bloomberg data.

If the expectations of a 0.4% rise of both the CPI and the core CPI is met:

The rolling 3 month annualized average for the CPI would rise from 3.2% to 4.0%. Not a big rise, but a rise.

And that of the core CPI would rise from 4.4% to 4.8%

No serious person who is interested in the CURRENT or RECENT inflation rate really gives a fat whoop and a holler about what the 12 month figure does -- that has several months of ancient data in it.

And in rolling averages, the number that drops out of the series at the beginning is just as important in changing the rolling average as the new number that has just been added. 12 months ago the CPI one month number was 0.7%, and the core CPI was 0.5%, and these are dropping out of the 12 month average. Fat whoop? Big holler? I don't think so.

But the media and innumerable message board pundits and "smartest people in the room" types will be blathering that inflation is cooling citing the movement in the useless 12 month figure. Sorry but inflation isn't cooling. Tomorrow's actual numbers might change that perception, but if they are 0.4% and 0.4% as forecast, then I continue to vote for "stalled at more than twice the Fed's target with a worrisome uptilt at the end" (see later on down when I discuss the core PCE -- classically the Fed's preferred inflation indicator for future inflation predictions -- and the other indicators. And the 3 month, 6 month and 12 month rolling averages of the core PCE).

There is nothing magical about the 3 month rolling average either - I chose it for its recency, and yet it is more than one data point so people can't dismiss it as a "one off" so readily.

For the CPI, I only have the month by month numbers in graphical form, below. (I don't give a fat whoop about 12 month rolling average graphs, which are ubiquitous everywhere).



The full set of the latest graphs, all through February, (CPI, PPI, and PCE) and their core equivalents are at https://www.democraticunderground.com/10143038482#post12

The rolling 3 month, 6 month, and 12 month graphs of the core PCE (classically the Fed's favorite inflation indicator for projecting future inflation) is in the same thread at https://www.democraticunderground.com/10143038482#post23 . They all indicate that this inflation measure has been essentially stalled for 6 months to a year depending on which rolling average you look at, with upward movement at the end. At more than twice the Fed's 2% inflation target.

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As the article points out, on the Fed's next rate increase, the CME FedWatch tool https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

As of mid-afternoon on Monday, markets are pricing in an ~80% chance the Fed raise rates by 25 basis points at its March 22 policy meeting with a ~25% chance the Fed leaves rates unchanged, according to data from the CME Group.

Hmm, ~80% + ~25% = ~100%? Who knew

Last week, investors placed a better-than-50% chance on the Fed raising rates by 50 basis points this month following two days of testimony from Fed Chair Jerome Powell that emphasized interest rates were likely to go higher than previously forecast.

Oh, before blaming Powell for his interest rate policy, realize that although he was appointed by The Great Orange Slobfather, he was reappointed by President Biden, and confirmed by an 80-19 vote in the Senate (only 5 Dems voted no. Additionally Bernie voted no. Obviously a huge majority (43) of Democrats voted yes. 13 Republicans voted no) https://www.senate.gov/legislative/LIS/roll_call_votes/vote1172/vote_117_2_00176.htm

Democratic no votes: Markey (D-MA), Menendez (D-NJ), Merkley (D-OR), Ossoff (D-GA), Elizabeth Warren(D-MA).

Democratic yes votes: Baldwin (WI), Bennet (CO), Blumenthal (CT), Booker (NJ), Brown (OH), Cantwell (WA), Cardin (MD), Carper (DE), Casey (PA), Coons (DE), Masto (NV), Duckworth (IL), Durbin (IL), Feinstein (CA), Gillibrand (NY), Hassan (NH), Heinrich (NM), Hickenlooper (CO), Hirono (HI), Kaine (VA), Kelly (AZ), Klobuchar (MN), Leahy (VT), Lujan (NM), Manchin (WV), Murphy (CT), Murray (WA), Padilla (CA), Peters (MI), Reed (RI), Rosen (NV), Schatz (HI), Schumer (NY), Shaheen (NH), Sinema (AZ), Smith (MN), Stabenow (MI), Tester (MT), Van Hollen (MD), Warner (VA), Warnock (GA), Whitehouse (RI), Wyden (OR).
+ King(I-ME)

The other annoying tiresome meme, that it's all Powell's fault, leaves out the fact that the vast majority of the Federal Open Market Committee has also voted for the rate hikes at every meeting.