On inflation, as for most economic indications, I watch the US
"Inflation Won’t Die The January inflation numbers came out this morning, and they weren’t good for Wall Street.The consumer price index (CPI) rose 3.1% in January. That’s a decrease from December’s 3.4%, but it exceeded consensus estimates of 2.9%. Core inflation, which excludes food and energy, rose 3.9% on an annualized basis, which is unchanged from December. But the consensus estimate was 3.7%. Core inflation also rose at its highest rate since April 2023. Here I want to make an important point about core inflation. From the point of view of everyday Americans, core inflation is nonsense.Gas in the car, home heating and food on the table are large parts of the total spending of most Americans. Taking them out of the inflation calculation is something only the eggheads would do.When Americans provide for their families, they don’t pay “core,” they pay regular CPI. That’s all you need to know when it comes to public policy, citizens’ well-being and (for politicians) how people will vote. For the record, 3.9% inflation cuts the value of the dollar in half in 18 years. Sorry, Wall Street — No “Pivot” The stock market threw a temper tantrum once the inflation news broke this morning, with all three major averages tanking. By the end of the day, the Dow lost 661 points, while the S&P lost 90 and the Nasdaq lost 350. But the good news for Wall Street is that today’s inflation data won’t cause the Fed to raise rates. In the Fed’s December meeting, Jay Powell essentially confirmed that the Fed had reached what they call the “terminal rate.” The terminal rate is defined as a rate that’s high enough to bring inflation down on its own without further rate hikes. By the way, a terminal rate is an invention by the Fed. There is no discussion of terminal rates in economic literature, and it’s not something the Fed has ever used as a policy tool. The Fed just made it up."
