Slow Progress on Inflation

    Inflation is entering restrictive territory, just not as fast as the bulls hoped (The Bears" I told you so"). April's CPI wasn't great, but it wasn't terrible. However, it still points to disinflation, and more importantly, it doesn't give enough fuel for the Fed to hike in JUNE. At least the market doesn't think so.

    Headline  & Core CPI

    • Headline CPI is now in "restrictive territory," a fancy word for being below Fed Funds. If we annualize the last three months of MoM-CPI, it's also in restrictive territory.
    • Core CPI is sticky, and this is the problem. But it's not moving up, either. MoM Core CPI came in as expected, and if we take the last three months and annualize it, we are very close to being below Fed Funds.

    Core CPI MoM was 0.41% and driven by only three components. The rest were 0 or negative

    1. Shelter ex-hotel 0.23
    2. Used Vehicles  0.14
    3. Motor Vehicle insurance 0.4. 

    Super Core

    Super Core inflation, which excludes energy, food, and housing, is what most "higher for long inflationists" bhang their hats on. I bet that it's in restrictive territory on the next data release.MoM SUper core was almost 0%. Thats Progress


    Pricing in the Last Hike

    After the report, the market is pricing in a 6% chance that the Fed will hike in June, down from 21% just 1 day ago. 


    The Bond market is also viewing this report as dovish 

    I expected Thursday's PPI to also come in line with expectations. The largest headwind thus far is the uncertainty from the debt ceiling debacle. 🤦🏾 More on that in a later post!
    I hope this was informative,Jeremy Fielder