Morning Report: The CPI comes in hotter than expected

Vital Statistics:

S&P futures3,511-77.75
Oil (WTI)86.78-0.54
10 year government bond yield 4.03%
30 year fixed rate mortgage 6.94%

Stocks are lower this morning after the consumer price index came in hotter than expected. Bonds and MBS are down.

The consumer price index rose 0.4% MOM and 8.2% YOY. Ex-food and energy, it rose 0.6% MOM and 6.6% YOY. Both numbers were higher than expected. Gasoline price declined, while food continued to rise. Shelter increased as well, and will continue to increase as it tends to lag home prices by about 18 months or so.

So far, we aren’t seeing anything that looks like deceleration in the core rate.

We will not get another CPI reading before the Fed meets in November. The FOMC meeting is November 1-2, so this is the number they will focus on, along with the PCE Index.

The Fed Funds futures are a lock for at least 75 basis points at the next meeting, and are beginning to handicap a 100 basis point hike as a possibility.

The FOMC minutes were released yesterday, and here is what they were saying about inflation:

Participants observed that inflation remained unacceptably high and well above the Committee’s longer-run goal of 2 percent. Participants commented that recent inflation data generally had come in above expectations and that, correspondingly, inflation was declining more slowly than they had previously been anticipating…. With respect to the medium term, participants judged that inflation pressures would gradually recede in coming years…

In assessing inflation expectations, participants noted that longer-term expectations appeared to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters as well as measures obtained from financial markets. Participants
remarked that the Committee’s affirmation of its strong commitment to its price-stability objective, together with its forceful policy actions, had likely helped keep longer run inflation expectations anchored…

Participants agreed that the uncertainty associated with their economic outlooks was high and that risks to their inflation outlook were weighted to the upside. Some participants noted rising labor tensions, a new round of global energy price increases, further disruptions in supply chains, and a larger-than-expected pass through of wage increases into price increases as potential shocks
that, if they materialized, could compound an already challenging inflation problem. A number of participants commented that a wage–price spiral had not yet developed but cited its possible emergence as a risk.

Anyone thinking the Fed is considering a pivot should be disabused of that thought from these comments. They noted that credit spreads were stable over the inter-meeting period and they think GDP growth will improve. In other words, they aren’t worried about a recession at all.

18 Responses

    • There’s also this:

      “Ye has also been at odds with his bank JPMorgan Chase & Co., where he had moved his money earlier. On Instagram, he criticized executives Bill Grous at JPMorgan’s wealth management business, investment banking Vice Chair Jing Ulrich and Chief Executive Officer Jamie Dimon. He said he couldn’t get the CEO on the phone or any deal flow. Representatives for Dimon and JPMorgan declined to comment on the matter.

      “I feel like there’s a lot of controlling and handling to suppress my ability to affect the American economy and industry,” Ye said of his experience with the bank.”


    • They say it’s because Kanye made a anti-Semitic comments but I think this is the real problem:

      “The rapper also courted controversy at his Yeezy brand’s fashion show last week by wearing and sending out on the runway a “White Lives Matter” shirt.”


  1. This isn’t parody:

    “Opinion: America’s problem is White people keep backing the Republican Party

    By Perry Bacon Jr.
    Columnist |
    October 13, 2022 at 11:31 a.m. EDT”


    • Complain that white people do anything as a group, even sort of.

      Also complain about whiteness and treat them as an inherently flawed group, all the time. And then be shocked they act the way you constantly treat them.


  2. Open season on gimps, y’all!

    ‘Bout fucking time!


    • I was noting on PL that it was a real short trip this time from “He’s fine, nothing to see here” to “You are a bigot for discriminating against disabled people.”

      They of course don’t see that by invoking the ADA, they are conceding the point that he’s disabled.

      Tucker sure knows how to push the buttons.


    • As always Greenwald calls it out:


    • NYT makes it official that the talking points have changed:


  3. Surprised the Babylon Bee missed this, seems like a layup.


  4. I cannot decide if the author is writing in earnestness or Babylon Bee satire. Regardless, it’s absolutely hilarious.


  5. Sublime.


Be kind, show respect, and all will be right with the world.

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