Let’s discuss goods and services. The latter is 63.4 percent of the CPI.
No Good Reason to Hike?
Hooray!
Let’s ignore food, gasoline, rent, medical care services, food, home prices, property taxes, and insurance because the price of home furnishings is falling.
And if we do that, the Fed allegedly has no reason to hike.
Core Services Percent Change Year-Over-Year Detail
Core Services Percent Change Y/Y
- Core Services up 3 months to 3.38 percent
- Medical Care Services 3.56 percent
- Rent 2.92 percent and now rising
- Owners’ Equivalent Rent 3.32 percent
Food, property taxes, homeowners’ insurance? You tell me.
If no one can afford any of those, they cut back on things like household furnishings.
And don’t look now but Trump is hell bent on another round of idiotic tariffs hikes bound to increase prices.
I have yet to write this up but expect to get to it shortly. The best we can hope for is the court throws them out.
Spotlight Tariffs
It’s Transitory
Best Case for No Hikes
The best and only case for no hikes is that Trump’s economic policy and war-mongering stupidity is going to quickly cause a recession and stock market collapse triggering so much demand destruction that prices inflation steadies.
I do not rule that out. It’s my base case eventually.
But the bond market sure does not see that view now. And if the bond market does not believe that, why should I (or anyone else)?
Meanwhile, grasping at goods inflation as a case for no hikes, while ignoring far more important services is economic silliness.
I was surprised by this post on X. Someone else sees it.
The ongoing problem is Congress and the Fed will step in again to stop the downturn. Neither will fix anything.
It would take severe asset price deflation to put a lasting dent on demand.
Five Measures of Inflation
All of the key inflation measures are well above the Fed’s target and rising.
Please note Consumer Price Index CPI Highest in Over Three Years, Another Disaster
Over the last 12 months, the CPI increased 4.2 percent the most since April 2023.
The Iran-Trump deal will take pressure off strait-related prices, especially oil, but it will not do anything for services, deficit spending, or new Tariffs.
For more discussion of the deal, please see Iran Confirms Deal! Trump Says Congratulations to All, Strait Open
If rent, OER, and medical care services are turning up, don’t expect to see more than temporary relief from gasoline prices, now falling.
Do expect more tariff inflation unless it sufficiently kills jobs and demand. Also expect more military spending and higher budget deficits.
bottom line were angry
https://www.thenation.com/article/economy/economic-insecurity-unrest-broketok/
Angry enough to vote for a dem.
A good chunk of tge republican party listens to fox news and conservative radio. There is a subtle/ not so subtle us vs them. Underline the programing. these shows are not making payroll selling trump coins/ gold / and viraga commercials.
Sadly the statement on increasing defense/war spending is still just accepted as fact when this entire Iran fiasco proves they deserve nothing but a massive cut. God I can only hope so. Parking decades old ships in the gulf as a blockade did what for us exactly? Nothing. The puffer-fish diesel subs and some mines laid by the alleged lesser-power were more than capable of holding us off, a country more committed to defending itself than we were attacking them into submission. When you listen to clowns like your son-in-law instead of sound military minds who can even apply the history of the U.S. Civil War which took 4 years to force the underpowered, undefunded south to concede defeat defending their home field, well, you deserve a bad outcome.
It does seem we can blow up speed boats carrying drugs into the U.S. but that doesn’t warrant an increase in funding.
What will happen–an increase in defense/war funding.
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Until we have meaningful asset deflation and a public willing to NOT buy/overpay for discretionary items, there’s no chance we get moderation in prices. Unless we have a non-backstopped increase in unemployment and economic slowdown.
They’ll just pull out their fiscal policy backstop checklist and NEVER solve the problem. Our government has managed to handle the economy like the recent handling of Iran.
Anecdotally I don’t know how anyone can afford much, the home supply store prices were insane on nearly everything this weekend so even if you own your home you have to decide WHAT to fix and what must wait.
Inflation destroys everything and everyone except asset holders. They control the levers of power so they prevent deflation, which destroys everything. Hard truth: we need the latter.
Warsh is another boot licker and will do what taco tells him to do or he will out like the rest of the few dissenters among this reign of terror.
Warsh is a professional bootlicker, but he is only one vote.
Why is the stock market never a part of CPI? Are stocks not something that a significant portion of the public buy, directly or indirectly (pensions)?
Because they aren’t consumed (by the Consumer in CPI). They are invested in as capital assets.
Want to know how much stock prices are increasing? Check out the S&P 500 percentage change over time.
Look at the inflation adjusted S&P500.
Atlanta gdpnow is @3.3% Inflation is > 3% So, nominal gdp is too high. The FED is too easy.
Will Kevin Warsh turn out to be an updated version of Richard Nixon’s Arthur Burns i.e. someone who is pressured by the president to keep interest rates low?
I agree with your assessment. My question though remains about what good would rate hikes do to e g services inflation which is not really dependent on demand. Do you really think that people will go sick and dying so that demand for health services will go down? Or stop driving and start living under a bridge to lower demand for insurance and rent?
It is time to recognize that this inflation is a monster that requires economic reforms, not higher rates.
Services also include transportation (airfare?), recreation and education. Lots of people will cut back on those if interest rates increase.
Mish, Can you give us some background as to why the gov’t discards the major expenses for most individuals out of their inflation calculations….gas, food, and rent?
I read an article recently that the government may further tweak items in the CPI to further disguise rises in inflation.
Even core CPI includes rent.
And the BLS excludes food and energy prices in core CPI because they are very volatile month-to-month. Want that info? They are already included in base CPI.
It would be easier if they just declared inflation null and void as a concept. All this pretending is so tiring.
Daniel Lacalle is a disgrace. Inflation has been over the Fed’s “target” for 5+ years. Short term rates are currently below inflation. Who the Hell do these people think they are kidding? Like we can’t look at the .gov numbers same as anyone else.
Our Troubles Are Over: The Average Price Of A New Car Was Closer To $49,000 Than $50,000 In May https://www.jalopnik.com/2193114/average-new-car-price-dropped-in-may/
What are the chances this will get signed and stick?
After all Taco Tuesday is almost here…
Kharg Island and Ras Laffan remain quiet and Hormuz is not yet showing much traffic. AIS systems may be turned off as no-one can rely on the three main players keeping their word.
It will be some time before the strait really opens and shipping returns to normal.
Inflation remains a real threat IMO…
THE BOTTOM LINE This latest flare-up shows the deep distrust and broken promises poisoning any path to peace. The Strait remains contested, radars are falling, and retaliation looms. https://x.com/Mark4XX/status/2066244541762752538?utm_source=substack&utm_medium=email
US has lifted blockade which allows Iranian traffic. Iran is waiting for phase 2 before opening their side.
Source?
Lloyds and the marine insurers are not exactly raring to go.
IfWhen Israel goes hard against Lebanon…it’s over.The chances of Israel not scotching this deal are roughly 0.0001%
Unfortunately, I agree.
Israel has been the aggressor all along.
Hard to have peace( anywhere) when 30 percent of the population hates each other.
Bibi going to take the L ?
Yeah, I don’t think so….
‘Netanyahu’s life project failed with US-Iran deal’
Israeli journalist Gideon Levy says the US-Iran announcement represents a personal defeat for Prime Minister Benjamin Netanyahu and his ambitions against Iran and Lebanon. His relationship with US President Donald Trump could also be at risk if Israel jeopardises the deal.Published On 15 Jun 2026
15 Jun 2026
https://www.aljazeera.com/video/newsfeed/2026/6/15/netanyahus-life-project-failed-with-us-iran