Deciphering America’s disinflation

Source Cryptopolitan

The September Consumer Price Index (CPI) report shows disinflation in America, but it’s not as straightforward as it sounds. Let’s break it down for you.

The headline inflation rate dropped to 2.4% in September, a tiny improvement from August’s 2.5%. Stripping out the volatile sectors like food and energy, core CPI told a different story, rising by 3.3% for the year ending in September.

That’s a slight bump from August’s 3.2% increase, which had already inched up from July.  The real culprit behind this was the housing market.

Shelter costs fell sharply in September, going from 6.3% in August to 2.7%. This was expected, as private measures had indicated that rent inflation would cool down.

But other categories are now stepping in to push inflation up. Prices for airline fares and car insurance rose, and various other goods and services saw slight increases.

Everything from doctor visits to cars, even books, ticked up.

Disinflation meets surprises

While the Federal Reserve is cooling down the economy, unexpected price hikes keep popping up. A few more months of these core readings, and some people might start worrying.

Sure growth is still above trend, and wages are rising at a solid 4%, so inflation might not settle as quickly as some expect. But it’s not all bad.

Global growth is weakening, households are saving less, and interest rates remain higher than neutral. There’s also room for housing costs to keep falling, which could help ease inflation pressure.

Despite all this, markets barely reacted. The two-year Treasury yields actually fell during the day, meaning investors don’t expect this inflation report to lead to tighter monetary policy.

Bitcoin was equally unimpressed. But the futures market still predicts a 25 basis point cut in interest rates come November, not a pause like most economists believe.

Prices and predictions

Economists insist that all key inflation measures slowed down in September. Both the consumer price index and the core measure, which excludes food and energy, likely rose by 0.1% and 0.2%, respectively, according to a Bloomberg survey.

These monthly increases would still be a step down from August’s.  If the numbers align with predictions, the Fed’s next policy decision won’t likely be affected much.

Even if core CPI surprises on the high side, economists don’t believe the report will change the Federal Open Market Committee’s (FOMC) view that inflation is on a downward trend.

Looking deeper into goods, economists see a slight rebound in the prices of used cars after months of falling. That’s bad news for core goods prices.

All these won’t won’t have a major effect on the Fed’s favorite inflation metric, the Personal Consumption Expenditures (PCE) price index.

This index has been sitting closer and closer to the Fed’s 2% target. Morgan Stanley economists pointed out that used cars make up a smaller portion of the PCE basket compared to the CPI basket.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
October hike odds climb toward 60% as Goldman and BofA both flip — what Warsh's "dose of accommodation" really changedRate futures now price roughly 55% to 62% for a 25bp hike at the October 27-28 FOMC, up from about 30% before Chair Warsh's post-meeting framing that the Fed is merely "removing some accommodation." Goldman Sachs has added an October hike to its forecast and Bank of America now sees moves in both October and December. Here is the repricing, the language behind it, and the two data points that decide it.
Author  Irene Q.
Sep 23, Wed
Rate futures now price roughly 55% to 62% for a 25bp hike at the October 27-28 FOMC, up from about 30% before Chair Warsh's post-meeting framing that the Fed is merely "removing some accommodation." Goldman Sachs has added an October hike to its forecast and Bank of America now sees moves in both October and December. Here is the repricing, the language behind it, and the two data points that decide it.
placeholder
Four jobs reports in five days: what JOLTS, ADP, claims and the September payrolls mean for the October Fed decisionThe US labour market faces its densest data week of the month. JOLTS job openings land Tuesday (7.2 million expected), ADP on Wednesday (70,000 expected), initial claims on Thursday and the September non-farm payrolls on Friday (100,000 expected, down from 162,000). Markets price a 64%-70% chance of another quarter-point Fed hike on October 28. The dollar index sits at 100.77 and the S&P 500 at 7,729.8.
Author  Mitrade
Sep 28, Mon
The US labour market faces its densest data week of the month. JOLTS job openings land Tuesday (7.2 million expected), ADP on Wednesday (70,000 expected), initial claims on Thursday and the September non-farm payrolls on Friday (100,000 expected, down from 162,000). Markets price a 64%-70% chance of another quarter-point Fed hike on October 28. The dollar index sits at 100.77 and the S&P 500 at 7,729.8.
placeholder
Nvidia's $150 billion buyback landed — and the AI sector fell anyway. That's the signal worth tradingNvidia closed up 1.68% at $228.86 on 28 September after announcing a $150 billion share repurchase authorisation, the largest single corporate buyback on record, while the rest of the AI complex sold off: AMD -3.6%, Micron -2.6%, Meta -4.8% and the Philadelphia Semiconductor Index -1.61%. The divergence is not noise. Capital is rotating toward cash-flow certainty, not abandoning the AI theme. With Micron reporting after the close on 30 September, here is what the split means.
Author  Irene Q.
Yesterday 06: 31
Nvidia closed up 1.68% at $228.86 on 28 September after announcing a $150 billion share repurchase authorisation, the largest single corporate buyback on record, while the rest of the AI complex sold off: AMD -3.6%, Micron -2.6%, Meta -4.8% and the Philadelphia Semiconductor Index -1.61%. The divergence is not noise. Capital is rotating toward cash-flow certainty, not abandoning the AI theme. With Micron reporting after the close on 30 September, here is what the split means.
placeholder
The 30-year Treasury just hit a 22-year high — and the bond market is not pricing the Fed, it is pricing the deficitThe 30-year Treasury yield closed at 5.56% on 28 September, the highest since June 2004, while the 10-year reached 5.24% and the 20-year 5.60%. The curve has steepened roughly 30bp in eight sessions even as October hike odds sit at 70.3%. That gap is the story: the long end is repricing fiscal and inflation risk, not policy. With PCE on Wednesday and payrolls on Friday, here is what the long end is really saying.
Author  Irene Q.
Yesterday 07: 08
The 30-year Treasury yield closed at 5.56% on 28 September, the highest since June 2004, while the 10-year reached 5.24% and the 20-year 5.60%. The curve has steepened roughly 30bp in eight sessions even as October hike odds sit at 70.3%. That gap is the story: the long end is repricing fiscal and inflation risk, not policy. With PCE on Wednesday and payrolls on Friday, here is what the long end is really saying.
placeholder
【Daily Brief】30-year Treasury tops 5.59%, S&P 500 slips to 7,670 and gold holds $4,180 — PCE lands tonightThe 30-year Treasury yield closed at 5.59%, its highest since June 2002, and the Dow fell 131.59 points to 51,349.92. US consumer confidence dropped to 81.9, a 12-year low, and JOLTS job openings fell to 7.1 million. August PCE and Q3 GDP both land at 8:30am ET tonight.
Author  Suzie
7 hours ago
The 30-year Treasury yield closed at 5.59%, its highest since June 2002, and the Dow fell 131.59 points to 51,349.92. US consumer confidence dropped to 81.9, a 12-year low, and JOLTS job openings fell to 7.1 million. August PCE and Q3 GDP both land at 8:30am ET tonight.
goTop
quote