The CPI was higher than expected in August, but the Fed will do what it wants to do.
The CPI Rose 0.4 Percent in August
The BLS reports the CPI Rose 0.4 Percent in August, higher than the Bloomberg Econoday consensus of 0.3 percent.
The BLS reports to a single decimal place. I calculate two decimal places.
CPI Month-Over-Month Percent Details
- All Items: 0.38
- All Items Except food and Energy: 0.32
- Food and Beverage: 0.47
- Food Away from Home: 0.29
- Food at Home: 0.58
- Shelter: 0.44
- Owners’ Equivalent Rent (OER): 0.38
- Rent of Primary Residence: 0.30
- Medical Care Services: -0.14
- Medical Care Commodities: -0.26
- Energy: 0.69
- Gasoline: 1.91
Other than medical care, this report was a disaster.
The Fed, when it looks at the CPI, looks at core CPI, all items except food and energy. That was a less than stellar 0.32 percent increase for the month.
The Fed’s preferred measure of inflation is the PCE price index, out later this month.
The PCE overweighs medical care whereas the CPI overweighs shelter. Medical Care Services is a very hot 0.79 percent. On this basis, the next PCE report will be better.
I will cover food, in a second post.
CPI Year-Over-Year Percent Change
CPI Year-Over-Year Details
- All Items: 2.9
- All Items Except food and Energy: 3.1
- Shelter: 3.6
- Medical Care Services: 4.2
- Medical Care Commodities: 0.0
- Rent of Primary Residence: 3.5
- Owners’ Equivalent Rent (OER): 4.0
- Food and Beverage: 3.1
- Food at Home: 2.7
- Food Away from Home: 3.9
The CPI bottomed in March of 2025 at 2.3 percent, now 2.9 percent.
Food and Beverage bottomed in April of 2025 at 2.7, now 3.1 percent.
CPI less food and energy bottomed in March of 2025 at 2.3 percent, now 3.1 percent.
Scant Grounds for Fed Rate Cut
There are scant grounds in the CPI for a rate cut on September 17.
But the Fed will do what it wants to do. The Fed’s justification will be labor market weakness. So, Trump will finally get his way.
But looking ahead, the Fed will have to deal with these clearly (for now) stagflationary tariff-sponsored details.
Screwed Up Measures of Inflation
These CPI and PCE reports are all worse than they look because both are very screwed up measures of inflation.
For starters, the BLS incorrectly underweights food away from home.
For discussion, please see Where Do You Spend Money on Food? How Screwed Up Are the BLS Weights?
Does the BLS match your budget?
BLS miscalculations on shelter are even more pronounced.
Is Homeowners Insurance Understated in the CPI?
I discussed very serious errors in the BLS calculation of shelter inflation in Is Homeowners Insurance Understated in the CPI? Shop Around!
Our Insurance went up by $2,000. Then another $2,000. Here’s our story.
The BLS does not factor in homeowner’s insurance at all, only a home’s contents.
Click above link for details.
The Fed does what it must for its competing dual mandates. Sell the Fed rate cut, certainly by the 19 Sept blow-off. A 50% drop in equities by 3-6 October will be the reality check for all participants. As Target goes, so goes the American consumer and service sector wage earner … Target does seems to be a good harbinger proxy for the American recessional asset-debt economy.
Wow. Calling a 50% drop in equities in less than a month? You’re either a genius technician or full of hubris? Will you let us know afterwards why your prediction was off?
Japan will build Alaska pipeline with steel made in the US, buying out tariffs. S.K will build ships with steel made in the US. Healthcare co will produce essential pharma. Community colleges will train student to fill jolts in their states. AI will train workers better and faster. People on transfer money will enter the workforce. Demand for highly skilled and skilled workers will rise. Trading schools and co will fill the jolt. Welders starting salaries are $75K/Y. After a few years they can earn $125K/Y. The labor force participation rate will rise to 65% – 68% after the boomers and gen X are gone.
How full can you fill “jolts?”
Cutting rates wont do anything. Subprime collapse has started with homes and autos. The cycle of layoffs begetting more layoffs has started. AI cannot do anything but consumre more energy and kill more human jobs.
Good grief. For the umpteenth time, the Fed FOLLOWS what’s already happened to T-bill rates. They WILL lower the rate at least 1/4% and possibly 1/2% because T-bills have dropped to around 4%.
Could not agree more about the FED and rates. Tone deaf and recking of bloated government buearcracy with 23K plus employees when they just follow the 2 year treasury rate. Who cares about the CP Lie when people don’t have a job. I bet supply and demand changes and food becomes very eleastic in spending without employment. We are on the flat side of the Beveridge curve. Nothing screams recession like the flat end of the curve.
The 10Y minus 3M is zero since Dec 2024.
Through 11 months, we’ve added $1.973T in debt for FY25.
Sept will probably be a blockbuster month.
September is the end of the fiscal year, so bad stuff gets shoveled in.
The Big Beautiful Boondoogle made things worse. Military Industrial Complex is happy, though. Just waiting for the new wars in Iran and Venezuela to unfold. He’s like Donald W Bush.
The Biden era of piling $8T debt was over in Jan 20 2025. TGA is $700B.
The assassin missed his target from 140 meters. Snipers aim either at the chest or the head, but not the neck. Charlie is dead, bc nobody put his hand on his neck to stop the bleeding, on stage, when he was carried out and all the way to the hospital. The sniper carried his gun to the trees, before dumping it, probably leaving his fingerprints all over the place.
Masked face. He rather planned everything.
Sunglasses, baseball hat. No face mask. No gloves. No ladder or air shaft. He had to jump. He picked up his gun and left a footprint on the grass. He is
a Luigi Mangione II.
1) Mid management homes are command centers with 4 monitors. They can be on conference calls 24h/day, including weekends and holidays. They are not getting overtime, or rent. They get bonuses if they fulfilled their targets and stock options. They can reach their customers, contractors or workers, all over the world. Globalization isn’t over. It’s on. Ceo and senior vp can talk to them to sell their visions. Mid mgt are the ones who implement their policies. If they care companies will flourish. If they don’t, co will languish. WFH deflated corp cost. WFH increased profit to a new all time high. They can easily absorb tariffs.
2) WFH “reserves” employees are getting dormant wages, until they get a call for duty. They usually have 2/3 service jobs. AI threaten them. Unemployment is low bc HR keep these low cost workers on the payroll.
3) Since Jan 2025, when Biden’s era was over, full time jobs are down 1.5 million. The trend is down. It will accelerate. Trump will cut to the bones.
Who told Mish & Wolf that JP will cut rates anyway.
“Scant Grounds for Fed Rate Cut”. I agree and agree that they will cut anyway. All that talk about Fed independence is fluff. When the ruling class wants the Fed to “print money,” they always will.
The Fed will because they are terrified about the possible actions by the senile, orange, psychopath.
He added 8 trillion to the national debt in 4 years the last time he was in office, continues deficit spending, his tariffs are not only a consumer tax but are severely disrupting the American economy, and he disingenuously asserts that lower interest rates even when the interest rates are at 4.5% are necessary to offset the interest on our national debt. The whole thing’s a joke. Like last time when he tried to bully the Fed to go to negative interest rates, he just wants free money for the banksters.
Plus, there’s still a lot of Mexicans around.
Come back and tell us how many months of a 96 month presidency Obama had non zero rates. Then do Trump, Biden, Trump.
Y’all act like he is the only one wanting zero…well when Obama had like 93 months of ZERO did you also say he wanted free money for banksters? Because they’ve been recapitalized over the 16 years since the GFC, 12 of those under democrat presidents.
He’s not unique. 4.5 is massively greater than 0 right?
I actually prefer his Orange a bit brighter (The Make-up Tranny is in for Murder) and his senility with a bit more drool.
One of the MSM stories today stated that this anticipated 1/4 point reduction is going to springboard job creation! That’s going to be the rationale for the cut, anyways.
So keep an eye out for the 100’s of thousands of new jobs soon to magically appear, all because interest rates went down 1/4 point. Whoopee.
Ai is gonna take its toll on white collar workers. That will knock everyone down a level or two. Think about it. The contractor who cant read is now gonna be i competition with a college educated contractor. Etc. the blue collar tweaker ( primus) is gonna have some competition
Everyone says this but can never tell you exactly what AI is replacing. It’s not coders, it’s not accountants, it’s not marketing, so what is it? At best it replaces half of data analytics jobs but even then you need a team making sure it doesn’t crap out bad data.
I think companies just want an out for the fact that they ran badly, hired too many people to do nothing, got caught on the AI bandwagon, and don’t want to admit that AI isn’t what they thought and they just suck at running their monopoly.
It IS coders, marketers, customer service agents and much more that are being replaced by AI.
Hiding your head in the dark so that you are unaware of all that is going on around you doesn’t make what is happening go away.
You have no idea what you’re talking about, and should stop embarrassing yourself.
“During a fireside chat with Meta CEO Mark Zuckerberg at Meta’s LlamaCon conference on Tuesday, Microsoft CEO Satya Nadella said that 20% to 30% of code inside the company’s repositories was “written by software” — meaning AI.”
https://techcrunch.com/2025/04/29/microsoft-ceo-says-up-to-30-of-the-companys-code-was-written-by-ai/
Same with Google, Apple and many other tech companies. Salesforce deleted 4000 jobs in customer service last year because AI is doing their work successfully.
Fools like Creamer and Trumpedo just like to hear themselves post BS.
I don’t even live in a hurricane/tornado/earthquake/wildfire/mudslide zone and my insurance costs have gone up 215% since 2000.
Risk has to be spread.
That’s BS! I live north of ATL, and I should not be paying one red cent for someone’s hurricane exposure in FL. At most maybe the GA coast which is very minimal. I shouldn’t be paying for the tornado damage out west either.
I should be paying the insurance risk associated with the homes in the 10 or so metro ATL counties. That’s hundreds of thousands of homes to spread my local risk.
That’s the problem with insurance. The insurers want to spread the risk to everyone they insure which is garbage.
And biggest scam associated with home insurance is that insurers have no vested interest in trying to keep claims payouts low. In other words, if someone needs their roof replaced, and the contractor says that’s going to be $30K, but there are reputable contractors who will do it for $20K, the insurers is fine with paying the $30K price, because it justifies RATE INCREASES. Insurers don’t price shop, that’s for sure.
WTF are you talking about? It is definitely not BS. The entire concept of insurance is “shared risk”.
Same here. Property tax just went up 25% y-o-y. Print more money fed; you haven’t devalued it enough.
CPI is a flawed indicator in the first place as it does not measure demand. A lower-income family who can only afford to spend $100/week on groceries isn’t gonna spend $110 if everything went up 10%.
CPI is set up to minimize payout increases in government entitlement programs. Inflation indexing for such programs led to this nonsense.
No, the removal of the gold standard in 1971 is what led to this nonsense.
Once we let the devil of fiat currency get his foot in the door, everything else follows.
If the Federal Reserve followed their legal mandate (“stable prices”) and if the Federal Government held to “zero deficits” (on average, like they had to under a gold standard), there wouldn’t be a need for inflation indexing.
I only look at CPI-W, which is what social security COLAs are based on.
Year over year, the CPI-W has increased 2.8%. However, there’s been an acceleration of CPI-W inflation over the last 6 months, with inflation running over 3% on an annualized basis.
If the Social Security COLA was calculated now (based on the last 3 months of data) the COLA for 2026 would be 2.6%. Just a hair above last year’s 2.5% COLA.
July, Aug & Sept are the months that feed into CPI data. I’ve read that the 2026 COLA may be 2.6% which is easily 0.4% below where it should be.
Interesting events right now.
We have a slowing economy but possibly rising CPI. Is some of the increase CPI just one time tariff increases?
How come nobody talks about a dropping dollar. That is inflationary. How much of the increase of CPI is based on the USD dropping 10% over the past 8 months. That is inflationary.
You can have a bad economy and inflation if you currency is dropping.
Will the FED save employment or try to stop CPI and rising asset prices. I am guessing employment.
I would not be surprised to see rate cuts with increasing CPI as the USD loses value.
Just guessing. Just and observation.
I think the last time “We have a slowing economy but possibly rising CPI” was 2008.
Between Jan 2023 and Aug 2024 food (green) was down 8%: from 10% to 2%. Lately it’s up 1.1% to 3.1%. 1.1%/8% ==> tariffs bs. In Q1 2023 rent (yellow) was 9%. It crossed OER (blue) in Jan 2024. The spread between them is 0.5%. We know that homeowners pay more in taxes, insurance and repairs and that rent is rising faster to meet landlords obligations after loans were up from 4% to 8%.
We cannot accurately measure either employment or inflation on a weekly or monthly basis. (Or, in the case of inflation, “at all”.)
We certainly cannot accurately forecast either employment or inflation.
So the Fed’s handling of their “dual mandate” is equivalent to piloting a supertanker in a thick fog using only the rearview mirror.
Back in 2007-08 they were not even able notice they’d run aground until 6 months into the recession.
In 2008, reported inflation remained stubbornly high even 6 months into the recession, in part because the rent and OER components lagged so badly, and in part because energy didn’t roll over as early as other parts of the economy.
P.S. Once the Fed starts cutting rates due to growth worries, it’s usually bad times for the stock market.
I think a large long term decline in the wealth illusion of the stock market and housing would be a good thing for the country by teaching people that real value is not in bubble asset prices.
CRB commodity index isn’t slowing down.
CRB Commodity Index – Price – Chart – Historical Data – News
Agree. The tariff tax is starting to show up in CPI but I guess Trump will blame the Fed when all hell breaks loose with inflation. Of course there are lots of variables now…will SCOTUS affirm tariffs are illegal or will they proceed in destroying America? Will the Fed lower? How much?
On the job front, I have two former co-workers (peers) from two companies ago call me up and tell me their whole department got laid off. They were asking if I were hiring. I saw somewhere there are 100+ applications for every job opening now.
Farmers in Nebraska and Arkansas all going bankrupt, manufacturing down, joblessness up.
It’s all falling apart and Trump/GOP own it 100%. 100%.
Mid-terms are 14 months away……
MPO45v2 wrote “It’s all falling apart and Trump/GOP own it 100%. 100%.”
My opinion is that government has screwed things up, both parties. It is more than Trump.
If you swing that way, hope that the Democratic Socialists come to power, a sufficiency of power, and that their theories of ultra-taxing the rich work and will fix unemployment, inflation and debt. 🙂
Of all the things I wrote in my comment you focus on blaming Trump/GOP. That’s your main worry? Lol. You will be knee deep in Trump sewage during his Great Depression and you’ll still be trying to convince yourself that it would have been worse under democrats. Heck that sewage may be radioactive from the nuclear fallout under Trump and yet you would still say “Kamala would have been worse….” Triple lol.
It won’t matter to me who wins the midterms, I’ll be overseas living like a king in a tariff free paradise. If I come back, it won’t be till 2036 after the bulk of the boomer have died off.
Got exit strategy?
You’ve been saying for months now that you’re leaving which is fine.
When you do, can you stop posting here on Mishtalk, please?
You give David are hard time about trying to take a middle of the road stance, while you’re constantly blasting Trump & anyone who supports him & his policies.
Buckle up, snowflake. The Cheeto Pedo is earning all the abuse he gets and more. As a fervent supporter of his pedophilic, idiotic regime, you are gonna have to grow a thicker skin.
Dude,
I’m just asking the guy to stop posting his constant one sidedness, then you butt in with your usual stick. FYI – I’m fine with the thickness of my skin.
Nice try, Mr. One Trick Pony.
The “hide” button works for me, eliminating those who have partisan blindness with just a few clicks…
I know. Good reminder. I used it a while back on President Musk.
I get the feeling he’s rebranded himself as El Look@MePedo.
I just can’t help taking the dig.
Why do I need to stop posting one sideness? Especially if you have thick skin? Seems like you’re a walking contradiction.
I’ll stop posting when you do, how about that? The fact that you’re triggered means my posts are having an impact so guess what I’m gonna do……….
🙂
Why are the farmers going bankrupt?
You can hear it from bubba himself here…
https://www.youtube.com/watch?v=4y4Qmv215gc
What is funny is not one commentor on that YT video you linked could feed themselves if the farms collapsed. They would all be in line for their Soylent Green.
Trump broke up with the farmers’s number-one buyer of AG exports (China), and there is no replacement. China, unlike the vast majority of the countries that cannot feed themselves, was easily able to pay market prices for US AG. The rest of them can’t; therefore: USAID (gone). So in just a few months they have lost China and the United States of America as their main buyers for AG surpluses. (And China is not the only country retaliating against US AG in order to punch Trump in the nose). August is the big month to buy soybeans, and China didn’t answer the phone. Surpluses have plagued farmers here since Colonial times. They had a nifty solution, and Trump destroyed it.
Trump wants lower rates. The proto-dictator wants it. Therefore its gonna happen. Where is Midnight? The guy who didnt think Trump could control interest rates. Watch and learn, little Midnight.
Looks like the sun set on Midnight…..He probably got laid off and is sulking somewhere…
Naw his type is always around somewhere, but I havent seen him.
At 7AM, in a clear frosty morning, the sun radiates infra through the eyes to the vision center in the back of your hollowed skull. But people with gaps in their brain cannot benefit from god free pharma.
English, please, Lord TopAMiddleBottom
He can’t afford his diabetes meds anymore, so he gets a little weird sometimes. He just wants some attention, is all, positive or negative, just some acknowledgment that he exists.
Despite every factual rebuttal to your posts you continue on the same nonsense. If he could control them like you say why did he wait until September? Is he being clever? Or maybe, just maybe, he can’t control them! Why didn’t he get zero his full first term until the pandemic? Why did Obama get 0 for 95% of his two full terms.
Histirically one could argue it’s Obama that could control rates …he couldn’t but he didn’t need to, The Bernanke pegged it at 0.
They all want lower rates. Trump is no exception. But he can’t control it.
The fed will lower rates as they once again ignore data and asymmetrically lean towards loose monetary policy…lowering at early job market weakness but willing to keep them low claiming inflation is transitory or lowering despite rising actual data within their laughable data dependent paradigm.
They will protect asset holders, support asset prices, and buttress the SIFIs.