U.S. Inflation Eased to 5% in March
wsj.com
wsj.com
If you use the last 3 months and extrapolate forward - we're back down to ~2.5%.
If you use only the last month and extrapolate forward - we're at ~1.25%.
Housing costs are ~39% of the economy alone. If those aren't inflating - it's pretty hard for overall inflation to be super hot.
Unless rents & owner's equivalent rents start shooting up again, inflation isn't going back to 10%.
Core-CPI isn't so rosy: the last three MoM values are 0.4, 0.5, and 0.4 (1.3% core CPI inflation over 3 months), which extrapolates to 5.3% yearly core-inflation.
Which _is_ down btw compared to last year... But its not nearly down enough.
The Fed is making judgements primarily off of core, not headline. e.g. Oil dropped to ~$65 last month, but is now at ~$85. Does it make sense to consider last month's number a durable trend down given that the low headline was primarily due to decline in energy prices? A decline that doesn't exist anymore? No, not really.
CPI in general is a poor measure for driving Fed policy since many measures are lagged, but even still, far more sensible to use core and strip outliers
They can be used pretty much interchangeably as an inflation measure, methodology not different enough to create material differences.
Nobody is implying rents when they say "housing prices"
Which is correct. What was said up thread is irrelevant. If you want to correct him for stating that as off topic or misconstruing the parent comment, that's fine. But spreading misinformation about home prices being included in CPI is not.
Again, nobody is implying "rents" when they say "housing prices".
Am I in some twilight zone episode here?
If an asset's income increases, the value of the asset increases.
Purchasing is less liquid than renting, so it tends to lag. And some characteristics are more amenable to renting vs other use.
But overall their trends are equivalent .
Asset values are not just a function of cash flow but also discount rates, growth in cash flow, and valuation multiples. Real estate cap rates have been compressing for decades, for example (same cash flow equals higher value, all else equal)
Please don’t spread misinformation in these threads
Discount rates have largely to do with inflation, and comes out in the wash of asset valuation changes.
> Asset values are not just a function of cash flow but also growth in cash flow
:/
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Price to rent ratio:
https://tradingeconomics.com/united-states/price-to-rent-rat...
Though really, that's just a graph of inflation.
Edit: misread GP as Housing COST. Not Housing PRICE
Housing Price is NOT included in CPI.
Housing Cost IS (via the OER)
It includes a survey based owners equivalent rents (OER), and a separate measure for tenant rents. Home prices used to be a factor in CPI calculations, but haven't been for decades now. It can be argued that rent is more relevant than valuations, since values fluctuate with rates... but ignoring valuations arguably allows asset bubbles to form more readily, which has its own downstream consequences.
In general, the CPI is not well suited to its purpose as the data is highly lagged. There are public rent measures that are much more real time, and would allow Fed to act more readily on current data.
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
Edit: I misread GP's comment as Housing Cost, not House Price. Though in my defense, I have seen some people imply Housing Cost isn't included.
The Fed plan isn't to just tame inflation but reduce employment to slow wage increases, reverse asset gains with "higher for longer", and restore credibility.
Get comfortable. Still a long way to go before that pivot.
No, the Fed’s plan is to tame inflation. If Powell can do that while maintaining strong employment, he’ll go down in history as a legend. Nobody wants unemployment to go up or asset prices to go down.
Sure, but if it doesn’t cause inflation it isn’t the Fed’s problem. In theory, it’s tough to square a tight labor market with moderate price levels. But we’re seeing a strange resilience in hiring as tech’s bubble projects and their employees absorb the bulk of the pain.
Everyone is expecting a quick pivot which is why I think that is exactly what will not happen.
Many people are making foolish purchases now at inflated asset prices and high interest rates because they expect that they will be able to refinance at lower rates in a year or so. What if they can't?
Once the general public starts to realize what "higher for longer" actually means we will (hopefully) have a huge sentiment shift to the downside with corresponding asset price corrections.
Sorry, but why do you think landlords have experienced an increase in mortgage costs?
Maybe if they have adjustable rate mortgages or if their loan originated after March 2022. But I don't think that's the case for the vast majority of established landlords.
What's way more likely is that everyone marking rent money off of leveraged property went ahead and refinanced everything to 2-3% fixed rate mortgages as soon as that became an option.
https://jbconsulting.substack.com/p/on-shelter-futures-part-...
Hows about this: Both R's and D's have printed too much money over the last 40 years. They are equally responsible on average since 1972, some more than the other at times.
It sounds archaic, dumb, and antiquated but things got worse after we left the gold standard and no, a person is not crazy for saying shiny rock with a certain scarcity prevented politicians from printing too much money.
This is pretty much what everyone serious was predicting. The inflation burst was driven by a savings glut (caused by the pandemic and excess assistance programs), a hiring boom and attendant wage pressure, and supply side shocks due to sanctions against Russia and a late pandemic wave in China.
Everyone one of those factors could be seen to be temporary at the time. And... now that they're all (mostly) behind us, inflation is dropping as expected.
But yet everyone had elaborate stories about how all that stuff didn't matter and how this was really due to (a somewhat partisan take on) monetary policy. Is anyone maybe revisiting their priors?
no, they claimed inflation would abate without Fed intervention
important to remember that the inflation rate is still more than 2x what the Fed deems acceptable, a victory lap may be premature
Only because of the 3 most distant months of the 12 month moving average. Those 3 months were 3% by themselves (not annualized), and the last 9 months have been 2% (not annualized).
Unless rates spike, inflation is going to drop below 3% in June. And it would take a ridiculous swing for it to not drop below 4% in June.
2.5%-7.5% annualized for recent months, using the Fed’s preferred measure (PCE, not CPI)
That's sort of meaningless without an antecedent for "they". What I'm referring to is the chorus of voices (heard very loudly here on HN) that claimed that the 2022-23 inflation burst was the inevitable results of government money printing out of control, and that that it was unresolvable absent large-but-largely-not-identified cuts in out of control deficit spending.
Now, everyone wants to pretend that the fed rate hike did it all and that no one was ever talking about financial policy? Meh. Inflation reducer go brrr... I guess.
I think the correct reading of the situation is that inflation wasn't transitory, which lead to the Fed raising rates much soon, much higher, and much more frequently than they anticipated (which is why SVB ran into so much trouble), and the heavy rate hikes eventually got inflation under control (which was the entire reason for the aggressive rate hikes).
[1] https://apnews.com/article/inflation-health-coronavirus-pand...
Not really, the transience predictions were for inflation to ease a year ago.
Yes, the existence of the Fed and the fact that it does monetary policy is part of the given for most of the people who predicted the inflation surge would turn out to be transitory, rather than durable.
> Interest rates staying low because of pandemic fears is the reason we had this gigantic inflation
They are a factor, more precisely, the combination of monetary and fiscal stimulus enacted in response an economic slowdown that, in retrospect, turns out to have been both one of the most rapid on record, but also extremely short and with a rapid rebound, overshot in monetary effect terms, leaving the US largely all in on stimulus during one of the most powerful economic rebounds in history.
So its probably correct to say that the monetary contraction the US is currently experiencing is due to high interest rates, but that doesn't stop the inflation that has already been caused by initial money printing.
[1] https://noahpinion.substack.com/p/is-the-fed-hiking-too-fast
Nothing at all transitory about it.
Once that has happened, the hard part is predicting how long it will take the impact to bleed out of the system - i.e. the lags - and knowing that inflation is measured over a year, the answer is at least a year after the money supply stabilises.
Said money supply:
https://fred.stlouisfed.org/series/M2SL
btw. the way its currently contracting... that's bad. Really, really bad. They need to stop that quickly, before it does any more damage.
Even though all of those have stopped by now, we're still paying even more (5%) than during that time. Pretty crazy
And even when inflation eases, I don't think anyone expects to pay 2019 prices for anything in the next 2 years
Yeah, I think one big difference between the “transitory” and “not transitory” camps is that the former camp tended to take “the Fed will continue to exist and engage in monetary policy in response to economic indicators” as a given, while the latter either a assumed no monetary response or vastly underestimated the effectiveness of monetary policy response.
> By your logic the great depression and great recession was also transitory
Even with policy intervention, neither of those resolved quickly, so, no, by the definition by which the post-COVID-recession inflation surge appears to have been transitory, those would still not be transitory.
This may not matter for capitalists and finance industry jargon heads who don't have to personally worry about food and energy, but for most of us it's a substantial part (if not >1/3) of our monthly bills.
Energy inflation is -6.4% year over year in the last CPI report, as well as being down month over month (both “raw” and with seasonal adjustments).
What on Earth are you talking about? (Yes, Food inflation is still fairly high, energy though…if anything, one of the drivers of continued inflation fears despite the low trend of the last several months is that the current low inflation is substantially dependent on energy inflation, which is generally historically highly-volatile, being negative.)
> Colgate CEO Noel Wallace: "What we are very good at is pricing."
> Kroger CEO Gary Millerchip: "We’ve been very comfortable with our ability to pass on the increases that we’ve seen at this point, and we would expect that to continue to be the case."
They wait for a disaster to price-gouge and then they use their market power to make us all poorer while at the same time reporting record profits. If you don't like the phrase price gouging maybe "excuseflation" will work (ie, the eggs incident aftermath).
Supply and demand is a sadistic but beautiful bitch that occasionally gives you some of that good lovin’ you enjoy with that beating you don’t.
The 5.0% number is being driven by falling (plummeting? -6.8%) energy prices. Food is still up, at 8.5%, and all items excluding food and energy stands at 5.6%.
So a lot of people ignore food and energy. When you ignore them, it's called 'Core CPI' and tends to be a better indicator of long term trends.
But we had a warmer than expected winter, meaning less demand on heating meaning lower energy prices.
Energy could fall even MORE post Ukraine invasion if there is some kind of resolution!
IMHO, that's more ethical than bypassing the paywall restriction.
Lumber alone is $380 now, about the level it was in 2019. I'm old enough to remember the gnashing of teeth on this forum when lumber prices were unsurprisingly super high in 2020 and how that meant inflation on everything was really high.
I assume the same people will be claiming the opposite now and that deflation is a major problem
https://tradingeconomics.com/united-states/food-inflation#:~....
https://ycharts.com/indicators/us_real_average_weekly_earnin...
Inflation is measured by looking at how the price of a standardized "basket of goods" changes. And this can go up and down quite quickly over short periods of time, for reasons that have nothing to do with generalized inflation. A yearly rate is long enough to make sure you're getting mostly signal, not so long that it loses meaning, and you also get to automatically normalize for various seasonal trends without relying on magic numbers.
Because there are seasonal variations, e.g. gasoline tends to be a bit more expensive in summer in the USA
https://www.eia.gov/energyexplained/gasoline/price-fluctuati...
How long until the unchanging underlying assumptions blow up under the added pressure of fiscal policy for the most important currency in the world leaning on them?
Inflation is one of the most important metrics for healthy governance, right up there with 'what wars are we fighting?' You really don't want it to be any more game-able than it has to be.
the fact that they don't do this means....
The original defintion was an increase in the amount of money.
This amount can be seen here:
https://fred.stlouisfed.org/series/BOGMBASE
We are still in an experiment which started in 2008. Unprecedented amounts of money have been printed. All this new money creates waves throughout the economy. With all kinds of complex indirect consequences for prices of different types of goods and services.
It will take many more decades to see how this experiment actually plays out.
The rise of stock prices and the downfall of Silicon Valley Bank are just the first ripples we can witness.
https://www.clevelandfed.org/-/media/project/clevelandfedten...
Not sure I share your worries though, tbh.
However, the same calcs have been used for a while here. All of this economic data needs to be taken and compared with the same data. It can't be used outside of that context and have a lot of meaning. This goes the same for unemployment numbers, GDP, etc. They lose a lot of meaning outside their context.
In context, inflation is easing. It may still seem high but it is easing up compared to previous months. How you interpret that is up to you.