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.
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Heads Up for a Busy “Headlines” Week – CPI Consumer Price Index aka Inflation Measurement – FOMC Federal Open Market Committee Rate Increase Announcement …
While the Holiday Season is getting closer, Economic data must go on….
On Tuesday we get the CPI (Consumer Price Index) bluntest of instruments for Inflation report from the BLS (Bureau of Labor Statistics) ….
All about expectations versus actual, “for the moment” …. Last months was 7.7% year over year and the expectation this time is for 7.3% …
Above the 7.3% will likely lead to disappointment and below or well below a short term applause …
On Wednesday Jerome Powell and his buddies at the FOMC (Federal Open Market Committee) will in all likelihood raise rate the much expected .50% to the 4.25% – 4.50% level….
While it is not super obvious from the chart above, the longer term 10 year treasury (blue) is much lower and trending lower than the shorter term 2 year treasury …. this is an inverted yield curve….
With Powell pushing short term rates higher with a .50% increase, the interesting observation will be what the 10 year does, as the 2 year is captive to Powell’s movements, being so near in time frame!
Sorry for the heavy start to the week… we promise an easier rest of the week… but wanted to let you behind the curtains of our watch this week….
Have a Great “Busy Economics” start to the week!
John A. Kvale CFA, CFP
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Posted in Economy, FOMC, General Financial Planning, Investing/Financial Planning, Market Comments
Tagged BLS, BLS CPI, CPI, Fed Funds Rate, FOMC, Interest Rates