Last Friday, June 10, 2022 the BLS (Bureau Of Labor Statistics) released their monthly data on the CPI (Consumer Price Index – Great Analysis Link Here) Most blunt measure of inflation — Ok lots of abbreviations but stick with us for the main takeaways…
For the record we called a possible top here, and while the increase of the CPI was only .4% than the prior month, it was NOT a deceleration YET…
Bottom Line Result
Cutting to the chase for those with little time – This hotter report will give the FOMC (Federal Open Market Committee) led by Jerome Powell a green light for further tightening faster – creating a faster slowing of the economy…
Quick FOMC Fed Funds Analysis – The Rate Increase Measure
(Take note once again, the first rate hikes on far left of chart took three years…. the next rate hike cycle ..one in middle right, took almost FOUR years… this one MAY be literally months… again this fits our thesis of headwinds came fast and are behind us (Look Forward not Back)– had to put that plug in while we were on the topic…)
CPI Analysis – What’s the Hold Up
With Owners Equivalent Rent/shelter being a very large portion of the CPI component…. its fast turn around is holding the CPI Up along with food inflation as well….
Note that far right movement up….
Oh and oil prices moving higher did not help either…..
Bottom line, continued FOMC rate increases, faster slowing of the economy, eventually… lower interest rates faster …..
Sorry for the heavy Monday, but wanted to get it out there to you guys as it helps us clarify as well!
Have a Great ” Sticky CPI Explained” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
$treet-¢ents 
Signs of a less aggressive FOMC/Jerome Powell ? … First time in a long time less happy to see the longest daylight day of the year pass … Summer Friday heading into Fourth of July …
Mid this week FOMC chair Jerome Powell in front of a legislative public speaking event, for the first time mentioned that the FOMC could not decrease oil prices and food prices via faster interest rate hikes.
OK, we may take issue with this slightly because if they beat demand down enough, it will most certainly put headwinds to higher prices of both of these assets. However more importantly, this was possibly the first sign of a less aggressive FOMC, again shared by Jerome Powell.
Instantaneously capital markets took notice of the comments with a much happier tone as did interest rates with an extremely happier tone as well…
Interestingly, and speaking out loud to everyone our thoughts, just two weeks ago, a much harsher tone was voiced by Powell …given that fact, it’s way too soon to say the FOMC has taken their foot off the brake a little bit ….. Heck we still have a lot of economic data to get through for the next few quarters… some of which may be very hot and could have the federal reserve reverse course once again… but maybe it is a start..
We will be watching, but wanted to let you know a possible interesting breadcrumb that occurred this week.
Hot Hot Hot
With an unusually, extremely, hot summer shaping up here in the south, breaking hundred degree days by the week, we wave goodbye to the longest day of the year with less sorrow this year and a bit of trepidation on what August … the seasonally hottest month of the year may bring.
Still better than ice and snow that no one here, present party included, knows how to drive on!
Today is a Friday, getting near Fourth of July midpoint of the year, enjoy your day and your weekend, and if you’re near us, stay hydrated and be careful out there!
John A. Kvale CFA, CFP
Share this:
Like this:
Leave a comment
Posted in Debt - Debt Management, Economy, FOMC, General Financial Planning, Interest Rates, Investing/Financial Planning, Market Comments
Tagged FOMC, Interest Rates, Jerome Powell, Less Aggressive FOMC