On stronger than expected CPI data, the market priced out rate cuts by the Fed for March and May. A full quarter-point cut for December was priced out.
Looking out to December of 2024, the market keeps pricing out rate cuts.
On December 26, 2023, the market expected a December Fed Funds rate of 3.82 percent. Yesterday, the expectation was 4.26 percent and today it is 4.49 percent.
In less than two months, the market dialed back three quarter-point cuts for December, one of them today.
Target Rate Probabilities for May 2024
Action in May
- A month ago, the market thought there was no chance the Fed would hold pat through May.
- A week ago, the odds were 33.4 percent.
- Yesterday, the odds were 39.3 percent.
- Today, the market says there is a 62.1 percent chance the Fed did not cut in March or May. There is no April meeting.
Another Hotter Than Expected CPI
For the 29th consecutive month rent was up at least 0.4 percent. Shelter, a broader category, rose 0.6 percent. Food rose 0.4 percent.
For discussion, please see Another Hotter Than Expected CPI Led by Shelter, Up Another 0.6 Percent
Hotter Than Expected
- The CPI was hotter than expected in January, up 0.3 percent vs a Bloomberg consensus expectation of 0.2 percent.
- All items excluding food and energy rose 0.4 percent vs an expected 0.3 percent.
- Year-over-year the CPI rose 3.1 percent vs an expected 3.0 percent.
- Year-over-year the CPI excluding food and energy rose 3.9 percent vs an expected 3.7 percent.
Energy declined 0.9 percent for the month, preventing a disastrous headline number.
For a detailed look at the data with a special focus on rent, please click on the above link.
I was born in the late 60’s and I don’t even recognize the world I’m living in right now. I remember a time when a $Million dollar home was something of fantasy….only attainable by the super wealthy. Now a million dollars is a joke. This is going to be the average price of a home in the next few years. Nothing is getting more expensive. That is exactly the wrong way to look at things because, in reality, (the correct way you should look at things) your $USD is becoming worth less and less and less and less. I retired as a multi-millionaire at 45 years old and I feel broke. I don’t think my $USD is going to even get me into my 70’s. Can someone give me Nanci Peloci’s # so I can get some stock tips to pump some more fiat money into the stock market and this collapsing system? …..at least I might be able to afford something if I get to 70. *best decision I ever made was not having kids. These younger folks are absolutely, completely fu**ed!
Inflation is falling
The idea that inflation is falling, is in a single word, ridiculous
This is true: The rate of increase in inflation year over year is falling
Inflation is rising.
Loans = deposits. An increase in DDs depletes TDs by an equivalent amount. Thus, the change in the composition of the money stock propels N-gDp. That, and short-term and long-term money flows reversed in Dec.
Protect the multi-millionaires – Let’s just keep “mouse-clicking” fake money out of thin air – and give it to the rich to play with and predate society even more…..
The CPI was only stronger than expected, due to hype of the CPI data. The Fed, via the MSM and many other talking heads, made sure the market priced out the idea of rate cuts by the Fed any time soon… They can’t afford to do it!
Rent, Taxes, Inflation, Energy, Food, Homes, Colleges, Healthcare, Vehicles, Insurance, amongst so many other things, that are all going up, and continue to do so.
Nothing can be done about inflation until two things occur. We must stop the money printing immediately, and take our lumps. We couldn’t afford to print and spend what we already have. We also gave away most of the newly printed money to other Countries and their needs, so now we need money for the U.S. but don’t have any, as it was all given away.
Hell, they are tryin to give away more billions of money, that we haven’t even printed yet. Talk about digging a giant hole for yourself! How stupid our are actual so called leaders? Have they ever in their miserable lives, ever balanced a check book? Idiots…
We must also stop spending all of our Taxpayer Revenue on stupid BS. Things like Climate Change, Wind Farms, and Solar panels, are all simply pipe dreams, as we are broke as a Nation, and can’t afford to put food on the table, and they want us all to worry about a made up weather issue that we can’t control, and hasn’t changed more than a degree or two in 100’s of years (show me real proof otherwise), and it had absolutely nothing to do with US! It’s called weather, and look it up, it changes constantly and has since the beginning of time…
No worries as they say, markets are up, wages are up, school loans are being paid off, all is good!
What’s that? You would prefer Food, Water, Shelter, and Safety? Really? Over what we have now? We have Hunger, Thirst, Homelessness and we are totally Unsafe.
If You see a problem with this situation, then please “Vote For Change” in 2024!!!
God Speed
The money stock can never be properly controlled by any attempt to control the cost of credit. Long-term money flows, proxy for inflation, reversed in December.
Landlords like to collect rent. Flexibility isn’t for them. The RE lords like to run a vassal state. The larger the “estate”, the better it tastes. The markets don’t care what they like. Rent disinflation might cont until those lords deflate, joining their comrades in the commercial RE. Landlords might deflate all over the world in a domino effect, starting in China.
Why should landlords be different? Does your mortgage and credit card company happily accept delinquency? When buy your groceries, do you pay when you feel like? How about your gas and utilities? Get real.
CRE has excess capacity. Housing has a shortage.
Banks shouldn’t even be in real estate. Bring back the Real Bills Doctrine.
SPY [1M] : July 2023 high was blocked by Oct 2021 close. After moving slightly up SPY might reach/ breach July high, backing up.
If inflation is still hot doesn’t that indicate the fed rate is too low and needs to be moved higher?
Shh! You’ll spread panic!
$10 Trillion of Federal debt refinancing comes due in 2024.
Yellen is going to love a 5% refinance rate.
Commercial real estate also.
Federal debt servicing is going to be a major talking point this election year.
Along with the southern border.
The post-tax real interest rate on federal debt still is negative. We tax payers pay the government in real terms to buy Treasuries. The (fiscal) tragedy of this country is that both Republicans and Democrats give a shit about fiscal responsibility just to win another election.
That’s because the economy is doing MUCH (I am becoming Trumpian) BETTER than anybody, including Mish, expected.
That’s because the fraudulent data makes the unsuspecting think the economy is doing better than anyone expected
There. Fixed it for ya
Be specific! Which data are fraudulent? Your 401 k returns? The GDP data? The CPI data? Or the Michigan survey data where “Republicans” (implicitly) claim that the unemployment rate under Biden has risen to 10 percent, real wage growth is -5 percent, and their 401 k balances have collapsed?
Actually real wage growth is -4%, and nominal wage growth is 5%. Learn the difference.
Exactly! If you are a Republican you believe inflation is 9 percent. Time to check in with a mental health facility.
Well well well…who here was saying that inflation would only go up after short reprieves here and there? Did anyone bother to check out the social security snapshot that just got released?
Let me clue you in, 140,000 brand spanking new socialists for the month of January. But what is really interesting is the cost of these benefits jumped to almost $120 billion/month and that number only goes up so those few lucky people here that know how to do math can multiply that number by 12 and come up with what the final total for 2024 will probably be.
That’s $1.4 trillion of spending money for the economy and as an added bonus no one had to work for all that free money, just consume, consume, consume and somehow all the goods and services will be produced with a depleting labor force, de-globalization, and angry burned out millennials. What could possibly go wrong?
It’s turtles all the way down and inflation all the way up. -MPO45v2
I’ would hate to be the moron who becomes President in 2028. Social Security and Medicare to go bankrupt during that term.
Begging younger generations to pay for something they will never receive.The defiance/possible social unrest to pay, via payroll taxes, for these programs will be tremendous.
Only solution is the Argentina model of stagflation to perpetuate these welfare programs.
Get the popcorn ready.
SS and Medicare have been bankrupt for years. Medicare ran out of “cash” 20 years ago, SS ran out of “cash” 10 years ago. Remember last May when Yellen wrote a letter to congress telling them that they needed to up the debt ceiling quickly so she would have the “cash” needed to pay SS and Medicare benefits?
Feel sorry for the President who is in office when the average voter finds out that SS and Medicare are and have been broke, insolvent and bankrupt for years. Lets sue the Majority Media for hiding that fact all these years.
Baby Boomer deaths have accelerated to 5720 per day. The silent generation has accelerated to 2340 deaths per day. 8060 per day times 365 days is 2,941,900 recipients dropping off of SS and Medicare a year.
There really never was a pandemic, but just increased deaths as a result of increased births starting in 1946. Average age of death for Baby Boomers has dropped to 75 years of age. If one million extra births a year occurred in 1946, it is only natural that one million or more extra deaths would start occurring 75 years later. Experimental medical remediation has not helped.
The serious rate cuts will not come till next year when either Trump or Biden wins the election. Biden will keep rates high till then to buy off the older voters who like interest on their savings. After the election, rates will go back to zero as they were in 2006-2020. The rich (hedge funds and private equity) will continue to buy up America (why no one can find a cheaper house to buy anymore), and Feudal America (Lord Trump, Lord Buffett, Lord Musk) nonsense will continue. Once someone is elected, who cares if inflation rips as a result?
All that this proves is “the experts” who set the expectations aren’t very good at their jobs.
Not just a few “experts” – the entire bond market routinely fails to predict Fed interest rate policy.
Bond market sucks since 2020. Out of touch and completely wrong and wildly reactionary
With untold inflation still pouring into banks and gov spending sprees, and CPI still around 10% annual, lower interest rates won’t make any difference in the inflationary depression and social collapse devouring the nation. The shrinking investment sector can keep playing it’s casino games with no concerns about earnings while the economy withers and gov largess replaces more traditional endeavors.
LMAO
And worth noting WTI is approaching 80. If only we had a second strategic political reserve now that we’ve drained the first.
They just banned LNG exports, driving the price of domestic natural gas way down. Logical next step will be to ban gasoline and all other fossil fuel exports.
They didn’t ban exports. They aren’t approving new ones. Dumb idea, but definitely different things. They have some in the pipeline already and these projects take years to build. I really doubt that is holding down short term gas prices. I could see them trying to ban or restrict gasoline export in a bid to keep prices down if it became politically helpful.
So glad you posted. The headlines on this subject have been horribly misleading and I admit to having been fooled. Now I’m wondering why nat gas prices have been plunging, but I suppose it could be warmer-than-usual weather at the start of the winter.
Demand is going YOY but Nat Gas is being overproduced. I guess producers do not mind selling nat gas at 1990 prices. LOL
Amazing but there has really not been any inflation in nat gas for 30 years. Sure it had a few spikes along the way .
I think lots of nat gas production is a byproduct of oil productions.
No worries.
Summer is coming and we’ll have oodles and oodles of free photovoltaic energy.
If it werent for the solar panels in TX last summer, TX would have had an electric meltdown. 110 in Houston for three months straight. Give solar a chance. 🙂
It can probably help in southern states, but can’t be counted on for base load. Problem is they want to push solar in MN and ME, where it can’t do much. Wind is also inconsistent and can’t provide base load.
Go see a psychiatrist. Solar energy is NOT free. It’s subsidized by we the taxpayers.
Solar energy is also subsidised by the earth. Millions (billions?) of tons of the earth are dug up each year to provide the coal used in the energy intensive refining process used to produce refined poly silicon as well as the various rare minerals used to make the cells. Then in 20 or so years those cells will either end up in landfill or go through an uneconomic energy intensive recycling process. Is the EROEI even positive?
Ryan: Yes, WTI is up a bit. Day to day is unpredictable. Longer term the pressure will be to the upside. Meaning a bit of pressure on inflation as well.
Wisdom Seeker: Misinformation is everywhere. Look for the sources that consistently are proven correct, rather than those can confirm people’s biases. Ryan is correct. No ban on LNG exports. Merely a review of new terminals after 2028. Lots of LNG terminals under construction now are unaffected. The US should export as much as possible.
KSU82 is correct: Natgas is being overproduced in the US. Even more so as a byproduct of shale oil. Every year shale oil is becoming more “gassy”.
We need an IGNORE button for people like Mypillow. Just another cult conspiracy moron.