June, July, & August 2024 CPI & PPI not what Fed Reserve Needs for rate policy change

The August 2024 CPI has been released:

CPI Home : U.S. Bureau of Labor Statistics (bls.gov)

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis, the same increase as in July, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.5 percent before seasonal adjustment.

The index for shelter rose 0.5 percent in August and was the main factor in the all items increase. The food index increased 0.1 percent in August, after rising 0.2 percent in July. The index for food away from home rose 0.3 percent over the month, while the index for food at home was unchanged. The energy index fell 0.8 percent over the month, after being unchanged the preceding month.

The index for all items less food and energy rose 0.3 percent in August, after rising 0.2 percent the preceding month. Indexes which increased in August include shelter, airline fares, motor vehicle insurance, education, and apparel. The indexes for used cars and trucks, household furnishings and operations, medical care, communication, and recreation were among those that decreased over the month.

The all-items index rose 2.5 percent for the 12 months ending August, the smallest 12-month increase since
February 2021. The all items less food and energy index rose 3.2 percent over the last 12 months. The energy index decreased 4.0 percent for the 12 months ending August. The food index increased 2.1 percent over the last year.

No, the numbers are still not what is needed to reduce the rate in September.

CPI is 2.5% down from 2.9% in July, but +.2% month over month.

Core CPI is 3.2% which is unchanged from 3.2% in July, but +.3% month over month. As a reminder and like the CPE, the Feds preferred measure is the Core CPI.

To me, the numbers are still not there to support a September rate cut. The Core PCE is still too high, the unemployment rate went down from 4.3% to 4.2%, and now we see the Core CPI holding at 3.2% for 2 consecutive months.

I'm sticking with my prediction that there will not be a September rate cut. If I'm wrong, it will be a .25% cut because Powell painted the Fed prematurely into a rate cutting corner when on vacation in Jackson Hole.

The DJIA 1 hour after opening is down 657.04, -1.61%. Apparently, investors agree with what I'm seeing and believe a rate cut is in doubt.

Tomorrow, we get the Producer Price Index followed by the Fed meetings next week. The table will be set to see if the Fed will behave rationally or give in to demands to cut rates prematurely and risk higher inflation on top of what we have now.

 

Thanking the wrong people. It's thank you Fed Reserve for the soft landing. Now, don't screw it up when the US economy is in a sweet spot for the first time in over 3 1/2 years.

 

wrong, my post here was before the other thread, but you go there. It's 2 months right and still saying a cut is not needed now and a cut now could push inflation back up.

 

Core PCE and Core CPI are too high, and the unemployment rate came down. There is no reason to cut. If a cut is made in September, it’s purely political and it will be viewed that way.

 

Both is right.

 

Go back and look again. The labor participation rate was unchanged.

The unemployment rate went down from 4.3% to 4.2%, both considered to be full employment.

The Core CPI, the preferred measure over CPI All, is 3.2% for both July and August. This data does not show a trend exists for making progress towards going below the Fed's 2.0% target. Having trend lines on inflation going lower was an element that the Fed wanted to see before changing their wait and see rate policy. This has not yet happened.

In July, the government said the hurricane in Texas did not impact the unemployment rate. I had read several sources on top of Texas that differed. Sure enough, temporarily laid offs came down by 900,000 in August. Many of those people were not working because of the hurricane damage. I still can't believe the government took the position the hurricane in Texas had no impact on employment.

I may well be wrong about a September rate cut, but changing rate policy to go on multiple cuts is just as bad as having waited too long to start fighting inflation deemed transitory at the time.

The US is not in a recession or headed into a recession despite the doom and gloom on Wall Street. My hope is the Fed continues to wait and see if inflation trends turn down towards 2.0% and less before changing their rate policy.

If unemployment had ticked up to 4.5% instead of down to 4.2%, I'd be calling for a rate cut in September too.

Another issue that is unrelated to inflation and employment is that the federal government cannot continue to pay the interest on the federal debt at these interest rate levels. I'm much more sympathetic to not wanting to see a higher public debt and government default on the federal debt be the reason for lowering rates. Ideally, I'd like to see a reduction in fiscal spending, but I don't think it will happen as the fiscal spending will continue to be inversely related with interest rates. They are right now squabbling in congress about kicking the can down the road for another 6 months along with Biden saying he'll veto any bill sent to him if the democrats don't get the spending they want.

 

Please explain how you came up with housing being 45% of Core CPI.