All Clear? Let s Hear from the Fed

TL;DR

The CPI print came in lower than expected, creating uncertainty around the Fed's next move.

Transcript

foreign as inflation cools how does a CPI print today play into tomorrow's fed decision welcome to real Vision Daily Briefing it's Tuesday December 13 2022 I'm Ash Bennington joined today by Tony Greer editor of the morning Navigator and founder of TG macro and my colleague Andreas steno Larson gentlemen welcome how you doing today Ash thank you I'... Read More

Key Insights

• 🛀 The CPI report indicates a slight cooling in inflation, with goods showing deflation and services showing stickier inflation.
• 😥 The drop in freight rates suggests potential deflation in goods and points to economic weakness.
• 👣 Market reactions to the CPI print include a relief rally and questions about the Fed's next move.
• ☠️ The report may influence the Fed's decision-making regarding future rate hikes.
• ❓ The market remains uncertain about the sustainability of the relief rally.
• 😀 The divergent trends in goods and services inflation highlight the challenges faced by the Federal Reserve in managing economic conditions.
• 😘 The potential impact of lower inflation on stock markets, commodities, and the crypto market is worth monitoring.

Questions & Answers

Q: How did the CPI print impact the stock market?

The CPI print came in slightly lower than expected, leading to a relief rally in the stock market. However, there are concerns about the sustainability of this rally as the market remains uncertain about the Fed's next move.

Q: What is the difference between goods and services inflation?

Goods inflation refers to the price increases in physical goods, such as cars or products sold in stores. Services inflation, on the other hand, is driven by costs in sectors like healthcare and education and is usually influenced by wage increases.

Q: How does the drop in China to U.S. freight rates indicate potential deflation in goods?

China is a major manufacturing hub, and freight rates reflect the transportation costs of goods from China to the U.S. The drop in freight rates suggests a lack of demand for transportation, which correlates with a decline in goods prices and potential deflation.

Q: How does the CPI report impact the Federal Reserve's decision?

The CPI report can influence the Fed's decision-making, especially if it deviates significantly from expectations. In this case, the lower-than-expected inflation rate may lead to a reevaluation of the Fed's plans for future rate hikes.

Summary & Key Takeaways

• The CPI print for the month showed a slightly lower inflation rate than expected, indicating some cooling in the economy.

• The goods and services sectors are experiencing divergent trends, with goods showing deflation and services showing stickier inflation due to wage-driven costs.

• The drop in China to U.S. freight rates suggests disinflation in goods. This, coupled with deflation in certain consumer goods like used cars, indicates potential economic weakness in the future.

• The market reaction to the CPI print was a relief rally, but there are questions about the sustainability of this response.