Don’t expect the Fed to be cutting interest rates soon.
The BLS reports the CPI Rose 0.5 Percent in January.
Hotter than Expected
- CPI: Bloomberg Consensus 0.3% v Actual 0.5%
- Core CPI Excluding Food and Energy: Bloomberg Consensus 0.3% v Actual 0.4%
- CPI Year-Over-Year: Bloomberg Consensus 2.9% v Actual 3.1%
- Core CPI Year-Over-Year: Bloomberg Consensus 3.1% v Actual 3.3%
CPI Month-Over-Month Details
- The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent on a seasonally adjusted basis.
- The index for shelter rose 0.4 percent in January, accounting for nearly 30 percent of the monthly all items increase. Rent of primary residence rose 0.3 percent and owners’ equivalent rent was up 0.3 percent.
- The energy index rose 1.1 percent over the month and the gasoline index increased 1.8 percent.
- The food at home index increased 0.5 percent and the food away from home index rose 0.2 percent over the month.
- The index for all items less food and energy rose 0.4 percent.
- Medical care commodities jumped 1.2 percent and medical care services was unchanged.
CPI Month-Over-Month Rent and OER
Both Owners’ Equivalent Rent and Rent of Primary Residence increased 0.3 percent. Shelter rose 0.4 percent. These are nasty numbers.
Shelter is 35.48 percent of the CPI, with OER at 26.28 percent and Rent of Primary Residence at 7.50 percent.
OER plus Rent is 33.78 percent of the CPI. That means other components of shelter such a utilities and insurance jumped in January.
A quick check shows energy services (electricity and natural gas) rose 3.09 percent. Ouch. Tenants and household insurance jumped 1.1 percent. Another ouch.
CPI Month-Over-Month Medical Care
The 1.2 percent jump in Medical Care Commodities is huge. Fortunately, Medical Care Services was unchanged.
Medical Care Services is 6.75 percent of the CPI. Medical Care Commodities is 1.53 percent of the CPI.
CPI and PCE Year-Over-Year Percent Change
The month-over-month and year-over-year results are headed the wrong way.
The year-over-year CPI was 2.4 percent in September. It’s now 3.0 percent, up 0.6 percentage points.
The Personal Consumption Expenditures (PCE) price index for January has not yet been posted.
CPI Year-Over-Year Percent Change
This BLS report was a disaster. The Fed will not be pleased and will not be cutting rates anytime barring an economic collapse.
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Deficits are rising and Trump will expand them greatly.
Because of your TDS, you left out one important aspect. The increase is over the last period of the Biden administration.
Just thought I’d point that out because some of your readers seem to be blaming Trump’s tariffs for this.
What *is* partly to blame for inflation that Trump and the Republicans and of course the Democrats did was pass the Cares act, which flooded the economy with trillions of new money and artificially low interest rates.
So I guess that means you’re giving credit to Biden for dropping the latest unemployment rate figures to 4.0%?
so Bayleaf is telling you readers you need to pay homage to Biden before Trump’s uncertainty EOs and tariffs get a bunch of you fired.
Welcome to the era of “Inflation Man”
The Fed wasted rate cuts this past fall.The Fed needs to start raising rates before inflation runs away. Gold made an all-time high a couple of weeks ago and has been edging higher to confirm the breakout. I’ve been expecting the 10year bond yield 52 month cycle low in March or April, but the cycle is so right translated that the larger cycles are strong enough to be concerned about an exponential spike in interest rates
We rent since moving to Australia… asking rent when we signed a year ago was $950 PER WEEK — we had to pay $1000 as the market is tight and dozens of others attended the inspection.
We are up for renewal — property manager says the LL will renew at $1100 (we are good tenants and pay quarterly in advance even though we do not have to)… if they put the house on the market the ask will be $1150-1200…. Checking listings in this area they will almost certainly get $1200….
So the rent increase would actually be over 20% if they were to find a new tenant.
We signed at $1100.
My auto insurance is up well over 10% YOY….
I reckon real inflation is in the region of 10-15%
https://www.politico.com/news/magazine/2025/02/11/democrats-tricked-strong-economy-00203464
Interesting day. The hard left admits their statistical tricks overstated the joyous state of the economy.
To restate it, astrologers are more reliable than government economists. That is admittedly a low bar, but still.
I’m shocked. Truly shocked. Those dastardly democrats.
Thank goodness we have Trump and his incredible honesty. He tells us that he had the greatest economy EVER in his first term.
One simple stat: Unemployment was 4.7% when Trump took over from Obama. It was 6.4% when Biden took over from Trump. And it was 4% when Trump took over from Biden.
Of course, this time it will be even greater yet. I look forward to the new Golden Age!
yeah, and if you ignore covid that actually looks good for democrats. smh
Trump handled Covid perfectly. Just ask him.
And he handled the economy perfectly too.
And this time he’s going to be a hundred times better than perfect.
I can’t wait to see the incredible results.
The big grab is on. By inflation they are squeezing even harder on the enabled before most of them become terminated like the rest.
Imagine if they actually calculated this number correctly without a myriad of mysterious, often illogical adjustments. Or perhaps used measurements for things like housing that actually tracked, well housing.
FED should raise interest rates RIGHT NOW! They should never have been cut in the first place, which was a blatant ploy to facilitate the election of Harris.
U.S. democracy will likely break down during the second Trump administration, in the sense that it will cease to meet standard criteria for liberal democracy: full adult suffrage, free and fair elections, and broad protection of civil liberties. https://www.foreignaffairs.com/united-states/path-american-authoritarianism-trump
So when discretionary spending goes down because folks can only buy food and energy, the fed will cut rates? Wouldn’t cutting rates make food and energy more expensive, in turn making discretionary spending even lower? Doesn’t make sense.
This is just getting started. I am waiting until he forces the Fed to lower interest rates. Tariffs will change things in ways we don’t even understand yet.
Nope. Trump tells us what his beautiful tariffs will do.
Bring back manufacturing and jobs.
Pay off the deficit and debt.
Lower prices and inflation.
Make us all rich!
Usher in a Golden Age.
I am waiting anxiously for the results.
And dont forget .. Papa is fully invested in it! 🙂
Absolutely! 😁
Though I intend to profit whether Trump is successful with his tariffs or not.
Not sure if anyone noticed. Canada and Mexico are dropping rates like hot potatoes. They both did rate cuts the past couple of weeks.
They need to for several reasons.
Their inflation rates have dropped a lot.
They have not fiscally stimulated their economies to the same extent as the US, so they are growing more slowly.
They are getting ready for Trump’s tariff attacks. Assuming he stops wimping out and withdrawing them.
It appears that the Fed has taken interest-rate increases off the table. The only question is the timing of future rate cuts. Money supply was never reined in and will possibly go higher from an already wildly-excessive level. How is this hawkish?
And the idea that the Fed only follows the bond market and has no influence on interest rates is preposterous. It’s absurd to believe that a free bond market would have kept interest rates at zero for more than a decade while inflation was running well above that level.
It’s ludicrous to think that the Fed purchasing trillion$ of bonds has no effect on the price of the bonds and therefore interest rates. The mere announcement of a QE program causes bond prices to spike as traders rush in to buy before the Fed.
The Fed has complete control of short-term interest rates and has significant influence on long-term interest rates through its bond purchases, incessant jawboning and importantly, the perceived Fed Put. And it should be noted that some of the bond purchases are still being rolled over on the Fed’s enormous balance sheet.
Perhaps the Fed is too focused on appeasing financial markets which has paved the way for burdensome inflation and unaffordable housing.
It is hawkish because the market believes that any interest rate cuts have been pushed out to the end of the year based upon inflation still on an upward trend. The market craves interest cuts to juice stocks. The big players like leverage at cheap rates. Treasury auctions should be indicative of the direction of rates.
Fair enough but it isn’t really hawkish because of the explosion in money supply which is driving the higher prices and inflation.
QT (on the long end of the T-bond curve) has been happening for quite some time and still is every month, even if the Fed is not changing its short-term Fed funds rate decision. That is removing ‘money supply’ on an automatic basis, not adding
The QT was too little and too late. It is taking some money out but the Fed’s overall suppression of interest rates also enabled the blow-out government spending which is adding to the money supply.
The debt refinancing cycle is coming to a head in the next few months. If the FED insists on keeping interest rates high with a stronger dollar, the world will have to default on its dollar denominated debt and sell its piggy bank of US treasuries. Liquidity will be scare and the Fed is then going to have to take rates to zero and buy up the elevated treasuries with QE to provide liquidity. Inflation will be the least of worries at that point because no one will have a job.
It is the high interest rates that keep the world buying treasuries to finance US deficits. It should know better how to hedge.
Liquidity is the reason they buy treasuries not interest rates. Matter of fact foreigners buy the most treasuries and get the worst returns of any group.
You should google this for an easy explanation on most financial websites.
Foreigners can put their money wherever they want, and A LOT of foreigners want to put their extra money into US bonds for liquidity (yes), but primarily for safe, guaranteed interest that is high compared to the rest of the world.
The Fed controls the short-term, overnight Fed funds rate. The US and global bond market control US T-bond rates. So the Fed funds rate does not cause the “world to default on its US denominated debt”.
Why doesn’t Powell reinstate reserve requirements?
Because in the new brave world, reserve requirement make little difference. When some unknown banks start to keel over, the rats will abandon the ship with the speed of internet electrons, and it’s over.
The FED will just print extra trillions to save the system that it, in its wisdom, created.
Monetarism has never been tried. I’d bet that the Fed’s technical staff doesn’t ever know what reserves available for private demand deposits, are.
Won’t make a difference, and you should know that.
Banks currently have WAY more in reserves with the Fed than any required % would be. So if the Fed reinstated such requirements, it would be on paper only. The banks already have more than that there.
Some banks or all banks?
The reporting I saw this morning was that they can only process 15 people at a time at Gitmo, so each military flight has a max of 15 passengers. From the photos DHS released, it looks like they’re using a huge cargo jet like a C-17, and the photos only show 3 or 4 detainees. The cost of transporting each person must be astronomical.
The cost of “owning the libs” is well worth it just like cutting your nose off to spite your face. It’s the golden age! /s
What’s worse? A recession to devalue assets, or more inflation? There are no other options.
People would (barely) rather chase a carrot on a stick vs seeing their home and stocks go down in value. Inflation makes current debt easier to pay in the future.
inflation is worse for the average trusting sheep ,but it greatly benefits the government.
Tree bark is free. I propose the BLS substitute tree bark for everything in the CPI basket and solve the inflation problem once and for all.
Tree bark is nutritious if eaten in large enough quantities. It can be used as shelter. It can be used as clothing. You can get medicines from tree bark. Tree bark can be entertaining and educational. The possibilities are endless.
What species of tree?[
Whatever species of tree is closest to you that still has bark on it that hasn’t been stripped yet.
I thought your avatar was Musk, not muskrat.
I just paid a few hundred bucks for pine bark nuggets. Bought from the Boy Scouts so they can make a few dollars for their programs.
North Korea already does this.
Did somebody say inflation? Gee who here was calling it for a long time now 😉
And just look at this gorgeous auto insurance chart.
https://data.bls.gov/timeseries/CUUR0000SETE?output_view=data
Car lovers are going to feel more pain at the pump and insurance pimp.
No wonder JPOW said people wouldn’t be able to get mortgages in 10 to 15 years yesterday, with this kind of insurance cost growth, it’s a no-brainer.
The funny thing is that tariffs haven’t even kicked in yet! Nor has Trump demand to lower rates! Wait till that happens!
“It’s tariff turtles all the way down and inflation all the way up!”
“…insurance pimp.” = Freudian slip.
My GEICO car insurance has been amazingly stable over the last couple of years, but that graph certainly mirrors my homeowner’s insurance experience.
And with housing prices still pretty high, property taxes aren’t going down much either. They love to re-assess every year, when prices are rising, so why would I be surprised if they skip to every three years, if we get into an extended downturn?
This is the unstated price we all pay for entry level cars costing 45K.
Doubling the price of cars means doubling the price of insurance.
Dont forget, maintenance, tolls, taxes/fees, parking, and other little things that add up to car ownership misery.
The USG REVISES their numbers significantly every month. This will be no exception. CPI will end up being in the “normal range”.
This is silly nonsense. Please show us when and where the US government has gone back and revised inflation numbers.
Sorry, Mish, as I said before, dictators dont care about unrest, and they especially dont care about inflation. Look around the world. Right now Trump is screaming at Fed and Treasury officials saying he doesnt care if every one of their wives and children die in the process, interest rates are to be lowered .. period. Trump’s rich friends cant continue to take America private and bring back feudalism without free money.
We’re actually looking for some unrest, so we can declare martial law and get this coup moving again.
With Donald on the news every night, and will be on the news every night forever, did the coup ever stop?
It’s not about HIM anymore. It’s about ME!
And allow me to compliment you on doing the joint press briefing with Trump and having your son present. Cute little kid!
I am sure his antics helped “normalize” many peoples views of you.
We’re working gradually toward me sitting behind the desk and Donald standing beside, and then on to having him bring me a coke when when I push his coke button.
I don’t actually like coke, but it will be fun watching him shuffle off to retrieve one.
The Tangerine Tornado has been in the news non-stop since 2015 when he started running for dicta.. sorry, president. He was in the news more than Joe Biden many times over the last 4 years. The liberals just can’t stop thinking about him. Maybe he’ll be able to get 50% of his wish-list accomplished – that would be a win.
Google Translate shows that “winning” is “potitus” in Latin. Close enough to “POTUS” for me!
Don’t rich people already own the banks? If so, can’t they already print up as much money as they need via loans to themselves to buy up whatever they want?
Some of us, yes.
Remember the billionaires who own all those dollars are not too thrilled with the printing up of MORE dollars, making every dollar worth less. Elon isnt the only one who has Trumps ear.
… and I care only the dollar only as something I can drain to feed my crypto accounts.
Seriously, how did you, once again, turn this into Trump as this report falls upon the last administration and JPow lowering rates TWICE despite the obvious need to remain firm or even raise. It’s a sickness, no doubt. It’s as if you forgot Obama had 8 full years of ZIRP and Biden had nearly 2. Inflation is bad. Trump’s policies are inflationary, Biden’s policies are inflationary. Obama’s policies and monetary regime he ultimately operated within were inflationary, eventually.
36 Trillion in debt, SS, Medicare, Interest, Pentagon and now what we can see in full view as grift, graft, corruption and fraud in nearly every other expendiature…..
This ends badly but your TDS is tiresome.
We will get unrest, we have unrest, much of which has been percolating with wealth inequality. But populism often just triggers the unrest to break the surface it isn’t what creates it, it’s what highlights the disturbances in the force that have been building. They didn’t start in 2016, they didn’t go away in 2020, they didn’t start in 2024. Get a grip man.
I’m sure you’re defending the Big G Government that we see, on the daily, has abused their power and our money like a personal piggy bank–yet you go after the only President and team that has actually exposed it. And fight the addressing of it. Beautiful how you’ve been convinced the D’s who’ve been at the helm, the D’s that represent nearly all of the deep state (see DC voting results, see USAID political party composition) are somehow the beneficent ones. -smh-
Shorten it to one paragraph and then Ill read. Remember you arent writing to hear yourself talk. You are writing to convince the READER.
If the reader doesn’t already agree unconditionally, he should be deported.
The Fed is forced to use rates to control the economy because they have currently an $800 billion MTM loss on their portfolio (Fed Funds Z.1 report shows the loss) and if they try to reduce liquidity they would have to realize the loss and get a Treasury bailout. So everyone cares about the 10-year rate as this decides how much the Fed can cut rates to reduce their portfolio.
Wow, where do you people get this crap?
The Fed is not “forced” to do anything. It’s an independent entity created by Congress to fret about inflation and unemployment. They buy and sell Treasury bills to influence short-term interest rates and maintain them at a specified rate. If they ‘make money’ on these interest payments from the Treasury (issuing T-bills), they can disburse that money back to the US Treasury since their Congressional charter is not to make profit. If they ‘lose money’ on portfolio losses, they simply don’t send money back to the Treasury which has been the case for awhile when they increased interest rates so much recently. They don’t need a Treasury bailout.
And “everyone” cares about the 10-year rate because it affects long-term rates like mortgages. That long-term rate (which the Fed does not explicitly target) does NOT “decide how much the Fed can cute rates to reduce their portfolio.” Sheesh
The Fed absolutely targeted long-term interest rates by buying trillion$ of (longer-term) Treasuries and MBS.
The Fed is NOT targeting the 10-year rate which Rick was referencing incorrectly. Read the statements the Fed puts out after each meeting.
Yes, during the Great Recession and COVID (both once-in-a-lifetime events hopefully), the Fed also bought longer-term bonds (QE) and not just short-term T-bills. That added a lot of liquidity to where the market was seizing up. But QT (the automatic roll-off of those longer-term bonds that were bought) has been happening for 2.5 years now, so NOT a targeting of long-term rates.
They continue to carry the long-term Treasuries and MBS on their balance sheet. That’s the important point.
From the Fed Reserve Bank of Richmond:
“With short-term interest rates as low as they could go, the Fed turned its sights to long-term rates. By buying up long-term assets, the Fed could reduce their supply, increasing their price and lowering their yield (the price and interest rate of bonds are inversely related).”
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
The Fed has removed more than $2T from its balance sheet from QT but M2 is near all-time highs. Thus, QT is not doing much to rein in money supply.
Concerning. Bloomberg economists think it’s related to the CPI rebenchmarking and the somewhat normal January effect that’s not always 100% picked up in the seasonals. There’s logic to that, but I don’t think it changes a recent upward trend. This happened last year as well, and the effects faded by April or so. 1) Fed on pause? Definitely. 2) Is it a catastrophe? That probably won’t be apparent for a few months, so go back to item 1 above. I’m solidly in the pause camp and would have preferred that the last cut hadn’t happened.
Neither cut was warranted. Raising rates would have been more appropriate. It’s their assymetric response that is most bothersome.
When rates go up, the valuations of tens of trillions of dollars worth of outstanding bonds go down. Portfolio losses all over…
When rates go down, bond valuations rise. Portfolio gains for all!
So every time they lower rates, everyone feels like they’re getting “free money”. But every time they raise rates, people feel like they’re being robbed.
In that light, it’s actually amazing that the Fed’s policy process isn’t even more asymmetric.
Once inflation gets going, though, all bondholders become bagholders. The classic 1970s phrase was “Certificates of Confiscation”.
Everyone is entitled to their opinion.
I definitely think the cuts were warranted. The yield curve was inverted for years. That is not good for normal market and economic functioning. Even now with these short-term rate cuts, the yield curve is basically flat (so still not normal).
As the Fed has explained many times, that’s why they are in a wait-and-see pattern.
While elevated, these estimates continue to understate “real inflation..”