Latest Inflation Numbers and Discussion

[shanehus]

A couple of interesting things I found in Powell's latest comments.

1. He said inflation is unlikely to return to pre-pandemic levels. In my view this further signals a possible change to the Fed's target. The 2% was set when all the attention was on increasing the rate of inflation to acceptable levels. We are in a very different environment now with a housing shortage and right-shoring.

2. He signaled that the tapering of QT could begin soon. Presumably this means they may soon begin buying treasuries to somewhat offset the runoff of the T-bonds and mortgage backed securities accumulated since 2008.

Both of these developments could put downward pressure on interest rates.

Powell’s statement about inflation not returning to pre-pandemic levels suggests a shift in the Federal Reserve’s approach. The 2% target was set when the focus was on boosting inflation.

 

[MichaelB]

The employment report was released today (here) and it was positive. Jobs increased by 303k, previous months were revised higher, average non-managerial wages by 4.2% YoY. Goods producing jobs, mostly construction and manufacturing jobs rose by 42k, which is quite healthy. The employment to population ratio and the labor force participation ratio both rose.

The slowing of wage growth is an important contributor to slowing inflation. We should never read too much into one monthly report, but this reinforces the view that the economy continues to grow and inflation is moderating.

 

[Montecfo]

On the jobs report full time jobs declined. So this is all part time job growth according to the household survey. I thought that was interesting. Also people holding multiple jobs for economic reasons rose 217k, big number.

Wage growth subdued, a good sign.

 

[AudiDudi]

303k jobs report - but 71k of that was new gov't jobs and 112k of that is foreign-born workers.

 

[AudiDudi]

A

 

[ShokWaveRider]

As for inflation - I got my homeowners ins. renewal today - a nice 32+% increase. Gas went from $3.49 to $3.89 on Wednesday. Motorhome insurance went up 22% a couple weeks.
I'm really glad my Social Security checks have increased enugh to compensate </sarcasm>

We paid $3.19 for petrol here in Northeast Florida yesterday.

 

[MichaelB]

This thread is to discuss inflation and policy measures, and what we should expect. Instances of individual prices can be posted in this thread https://www.early-retirement.org/forums/f27/examples-of-current-inflation-add-yours-114205-57.html

Snark and sarcasm interfere with the discussion and are not welcome.

 

[marko]

I don't see any burning need for a rate cut.

Kinda funny isn't it?! Now, everyone here is making easy money on what used to be called 'ballast'. I'm almost guaranteed 7.7% for the year in 'relatively safe' holdings with little downside.

As I always only plan on a 6% yearly gain--often with a some amount of risk--I too would like to see the rates held for a while.

 

[Fermion]

Last month I paid $4.19 a gallon for gas and today we paid $2.89.

Deflation? No, just traveling from Washington state to Texas.

 

[Montecfo]

I feel like the economy right now is like a 2 headed coin flip. It is remains relatively strong for now, great. We know the Fed is unlikely to raise and eventually will cut. So if this little spike continues, add to longer-term bonds, another bite at the apple.

If the economy weakens further, rate cuts will support the market in the short term.

Not bad either way.

 

[Chuckanut]

Another view point from today's WSJ:

Wall Street’s expectation that the Federal Reserve will cut interest rates several times this year has helped power stocks to records. Now, some investors think the central bank might not cut rates at all.

After the latest blockbuster jobs report Friday showed continuing strength in the economy, more traders are betting the Fed may cut the benchmark federal-funds rate just once or twice this year, fewer than officials’ last median forecast of three quarter-point cuts. And a handful are even starting to wager that the central bank will leave rates where they are.

My crystal ball is cracked, I can't read minds, and my time machine is broken, so I don't know what will happen with interest rates. But, my instincts tell me the trip from 3+% inflation to 2% inflation will take longer than many have predicted.

 

[Montecfo]

Calling it blockbuster is a bit much.

The blockbuster for me is realizing that full time job growth over the past 12 months has been negative.. That's right. All the job growth in tye past 12 months has been part-time jobs.

As the piece below notes, when full time jobs decline over a 12 month period for two months in a row, as they just did, historically we have been in recession or about to enter recession. Not a great fact.

https://mises.org/mises-wire/march-report-recession-full-time-jobs-here

 

[audreyh1]

CPI for March 0.4% seasonally adjusted

Last 12 months unadjusted 3.5%

https://www.bls.gov/news.release/cpi.nr0.htm

 

[JoeWras]

I came out of my time away to see what ER is saying about this.

I'm not surprised.

The bias has been pretty obvious here. A bad report won't be discussed, especially with an election coming up.

Hope you are all doing well!

Back to my hole.

 

[GenXguy]

I came out of my time away to see what ER is saying about this.

I'm not surprised.

The bias has been pretty obvious here. A bad report won't be discussed, especially with an election coming up.

Hope you are all doing well!

Back to my hole.

Good to see you stopping by and posting.

Looks like stocks are down on the news as well. It's not something we can ignore. We seem so far from that 2% target that the Fed wants to see some indication of progress towards:
https://www.cnbc.com/2024/04/10/fed-meeting-minutes-point-to-caution-on-inflation.html

“Participants generally noted their uncertainty about the persistence of high inflation and expressed the view that recent data had not increased their confidence that inflation was moving sustainably down to 2 percent,” the minutes said.

 

[MichaelB]

I came out of my time away to see what ER is saying about this.

I'm not surprised.

The bias has been pretty obvious here. A bad report won't be discussed, especially with an election coming up.

Hope you are all doing well!

Back to my hole.

As far as I can tell every inflation report published this year has been discussed here, and the previous thread discussed every report published in 2023.

Not sure why you brought elections into the discussion, but they have nothing to do with the thread topic, so better left alone. On a personal note, no need for the snark.

 

[pb4uski]

Kinda funny isn't it?! Now, everyone here is making easy money on what used to be called 'ballast'. I'm almost guaranteed 7.7% for the year in 'relatively safe' holdings with little downside.

As I always only plan on a 6% yearly gain--often with a some amount of risk--I too would like to see the rates held for a while.

What are you getting "almost guaranteed 7.7%... in relatively safe holdings with little downside" with? What CUSIPs?

 

[MichaelB]

CPI for March 0.4% seasonally adjusted

Last 12 months unadjusted 3.5%

https://www.bls.gov/news.release/cpi.nr0.htm

Thanks for the link.

FOMC minutes from March 19 were also released. (here] A quote

In their discussion of inflation, participants observed that significant progress had been made over the past year toward the Committee's 2 percent inflation objective even though the two most recent monthly readings on core and headline inflation had been firmer than expected.

Some participants noted that the recent increases in inflation had been relatively broad based and therefore should not be discounted as merely statistical aberrations. However, a few participants noted that residual seasonality could have affected the inflation readings at the start of the year.

Participants generally commented that they remained highly attentive to inflation risks but that they had also anticipated that there would be some unevenness in monthly inflation readings as inflation returned to target.

It looks like the slope of the inflation curve may be changing from downward to flat. Housing costs, which are heavily methodological, are still working their way through the calculations, and they have a significant impact on the overall number.

I think “cautiously optimistic” is tending a bit away from optimistic and toward cautious.

 

[Chuckanut]

I

Back to my hole.

I trust your hole is warm and cozy.

For quite some time a few of us here have been skeptical of the smooth glide path to 2% inflation by late 2024 or mid 2025. A Trillion Dollars in new deficit spending in the last 6 months seems to be a very strong air current to fight as we head for safe touchdown at the 2% airport. The ride will be bumpy at best. Hopefully the door won’t blow off thanks to faulty workmanship.

 

[Montecfo]

Certain foods are barely up over the past year. There was been some relief in the grocery aisle. But overall this report was a bit challenged.

The PPI tomorrow and the PCE will either add to or reduce this concern. But it seems like housing is continuing to look rather flawed. It has to moderate at some point to reflect that actual activity of rents.

Some fiscal relief in the forn of reduced deficit spending would be welcome if seemingly unlikely on the present course.

Rising energy prices are no help.. These factors could keep inflation and rates flatter for longer.

 

[DJRR]

Calling it blockbuster is a bit much.

The blockbuster for me is realizing that full time job growth over the past 12 months has been negative.. That's right. All the job growth in tye past 12 months has been part-time jobs.

As the piece below notes, when full time jobs decline over a 12 month period for two months in a row, as they just did, historically we have been in recession or about to enter recession. Not a great fact.

https://mises.org/mises-wire/march-report-recession-full-time-jobs-here

I get that is his opinion, but that does not make it so. He is trying to reconcile data from 2 different reports that measure different things. As he notes, average weekly hours worked is flat while jobs and labor participation have increased. More hours are being worked. More money is being earned and spent. I would not call that a recession, but OK. Long term unemployment is down. We do not know if the preference is for part time or full time work at the margin. We do know that more people are working and real wages are increasing.

This strength in real wages and spending has made the CPI decline "sticky" as aggregate demand has not been adequately reduced by the interest rate hikes. Not sure what he is arguing for policy wise - cuts to offset the coming recession indicated by his opinion of part time work or increases to blunt the reignition of inflation. Seems to want stagflation, which seems an odd preference.

 

[marko]

What are you getting "almost guaranteed 7.7%... in relatively safe holdings with little downside" with? What CUSIPs?

OK, so "safe" is relative but I moved a notable chunk into TFAIX, Treasuries (5.39% via PRTXX), PTY and PDI. Each of them has paid good and reliable interest/dividends over a long time. All totaled the mix pays about 7.7%.

Yes, this wave will come to an end at some point but the risk is tolerable for me at this time. I view it as a short term (one year?), easy gain as long as the Fed continues to cooperate.

My original comment was in response to Gumbys post that he didn't see the need for a rate cut. Again, a lot of these holdings were paying 2% not long ago and now, as "ballast" they're making impressive payments.

 

[milford]

Certain foods are barely up over the past year. There was been some relief in the grocery aisle. But overall this report was a bit challenged.

The PPI tomorrow and the PCE will either add to or reduce this concern. But it seems like housing is continuing to look rather flawed. It has to moderate at some point to reflect that actual activity of rents.

Some fiscal relief in the forn of reduced deficit spending would be welcome if seemingly unlikely on the present course.

Rising energy prices are no help.. These factors could keep inflation and rates flatter for longer.

That short relief in grocery aisle seems to be trending backwards again. Eggs @ Aldi is $3 a dozen again (supposedly another avian flu), cocoa prices are at all time high, and energy prices are trending up so I don't see prices of groceries going down anytime soon.

In terms of rent prices, I don't understand how one can expect it to subside (unless landlords are willing to take loss) when housing prices are still strong (increase in property taxes every year), every insurance renewal price is through the roof (pun intended). My increase in the last two years has been 25% and 35% respectively and that's rather mild compared to some of my friends and family where I've heard as high as 50% increase from the previous year.

Overall, I don't see how inflation will subside without a recession.

 

[GenXguy]

That short relief in grocery aisle seems to be trending backwards again. Eggs @ Aldi is $3 a dozen again (supposedly another avian flu), cocoa prices are at all time high, and energy prices are trending up so I don't see prices of groceries going down anytime soon.

I posted in the inflation examples thread, surprised eggs were down at Walmart several days back after having been up. Was nice to see something drop in price. Sometimes there are good sales, so that's where you can sometimes find some relief, even if it's not really deflation. And yeah, those high energy prices do seem to find there way into many things. I don't drive much, but there are all the indirect costs.

 

[Montecfo]

People commonly "dispute" national price trends by using their own anecdotes as "real" and labelling the national figures as faulty.

The error being made should be obvious.