Inflation Numbers ¯\_(ツ)_/¯

We got the Consumer Price Index (CPI) report today, and year over year inflation fell to 2.9%, less than the 3.0% forecast, and the Producer Price Index (PPI) which gives the prices that manufacturers pay for their raw materials, fell as well

The consensus is that the Fed will have to cut rates now, but I'm not so sure:

Inflation dropped in July to its lowest level in three years on an annual basis, setting up the Federal Reserve to cut interest rates soon to take pressure off the economy.

The snapshot was the clearest indication yet that inflation is heading back to normal levels from 40-year highs — without a recession. Central bankers won’t be caught celebrating, scarred by years of unexpected twists that repeatedly upended the Fed’s inflation fight. But officials will close out the summer with the surest sense yet that it’s time to loosen up on the economic brakes, possibly starting next month.

………

Data from the Bureau of Labor Statistics showed July’s annual inflation rate hit 2.9 percent, dipping below 3 percent for the first time since March 2021, when price increases took off on the heels of the pandemic. A core measure that strips out volatile categories such as food and energy also saw the smallest 12-month increase since April 2021.

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For months, Fed officials have said they won’t trim borrowing costs until they’re confident inflation is easing to normal levels. Now that they’ve come about as close as possible, officials are increasingly acknowledging the risks of keeping rates too high for too long. Already, hiring has slowed down, and global markets are jittery over whether the Fed might have put too much pressure on the economy overall.

Housing continued to dominate the inflation snapshot, with shelter costs accounting for nearly 90 percent of the monthly increase. Rent costs have been cooling for some time now, but economists are still puzzled about why that shift didn’t show up in official statistics until this summer. July saw a slight backpedal, with a key rent gauge rising a smidgen more than in previous months. (The widespread expectation is inflation won’t come down all the way to normal until there’s major headway on the housing component.)

Maybe if we started regulating speculation in real estate, or even just the people who are using real estate to launder money, that would that would be great. 

As to the PPI:

U.S. producer prices increased less than expected in July as the cost of services fell by the most in nearly 1-1/2 years amid signs of diminishing pricing power for businesses, evidence of waning inflation pressures that reinforced hopes of an interest rate cut next month.

The report from the Labor Department on Tuesday also showed favorable readings for most of the components that go into the calculation of the personal consumption expenditures (PCE) price indexes, the inflation measures tracked by the Federal Reserve for monetary policy. Moderating inflation should allow the U.S. central bank to focus more on the labor market.

………

The producer price index for final demand edged up 0.1% last month after rising by an unrevised 0.2% in June, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast the PPI gaining 0.2%.

In the 12 months through July, the PPI increased 2.2% after climbing 2.7% in June.

Obviously, inflation is receding. 

The question is whether or not the sado-monetarists at the Fed will deign to lower interest rates.