Year-over-year PCE inflation jumped to 3.5 percent. The Fed wants 2.0 percent.
PCE Year-Over-Year Details
- PCE bottomed in April of 2024 at 2.3 percent, now 3.5 percent.
- Core PCE bottomed in April of 2024 at 2.6 percent, now 3.2 percent.
- PCE goods bottomed in September of 2024 at -1.2 percent now 3.8 percent.
- PCE services bottomed at 3.3 percent last month, now 3.4 percent.
PCE Month-Over-Month
PCE Month-Over-Month Details
- PCE: 0.66 percent
- Core PCE: 0.29 percent
- PCE Goods: 1.43 percent
- PCE Services: 0.32 percent
Much of the jump in PCE is oil and goods-related to the war. If you with to ignore that, please note that 3.2 percent annualized is 3.91 percent. The Fed wants 2.0 percent.
Four Measures of Inflation Percent Change Year-Over-Year
There is every reason to believe the bottom is in. Technically and fundamentally I expect higher.
Four Measures of Inflation Percent Change Year-Over-Year Details
Four Measures on Inflation Detail
- PCE 3.5 percent
- Core PCE: 3.2 percent
- CPI: 3.26 percent
- Core CPI: 2.6 percent.
AAA National Fuel Prices
Regular gasoline prices are up 27 cents from a week ago.
Expect Continuation
There is no reason to expect any of this to stop.
The administration is feeding Trump the lies he wants to hear, that Iran is on the verge of collapse.
It’s true that Iran is suffering huge damage from the blockade. But so is nearly every gulf state. And so are US farmers regarding diesel and fertilizer prices.
US consumers are downright angry and it reflects in the polls.
Worst Informed President in History
On April 26, the Wall Street Journal reported Trump Says Iran Has Around Three Days Before Oil Pipelines Could Explode
President Trump said Iran has about three days before its oil pipelines risk explosion from being clogged up, as the country grapples with a shortage of storage space for the oil it produces.
Shipments from Iranian ports have been halted during the U.S. blockade of the Strait of Hormuz. That means Iran has to store its oil, but the country’s storage capacity is limited.
Once the pipelines explode, “you can never rebuild it the way it was,” Trump said Sunday on Fox News. “They are under pressure.”
Asked whether Beijing was helping Iran, Trump said he believed China’s assistance has been limited. “I think China could have been much worse than they’ve been,” he said. “I’m not overly disappointed.”
Earlier this month, Trump threatened to impose an additional 50% tariff on China if Beijing were found to be supplying Iran militarily. Economically, China has provided Tehran with a financial lifeline for years by buying most of its oil.
Iran is in pain over its oil wells. You can’t just stop them. Pressure drops they fill with water and other related problems.
Trump sees this a win. It’s not. If Iran’s wells are damaged, that damage is permanent. It will reflect in higher prices at the pump.
And it’s not just Iran’s wells at risk. The whole strait is blocked.
But the sycophants in the administration tell Trump what he wants to hear.
There Is No Off Ramp
There is no off ramp in sight.
Trump makes impossible demands, and expects countries to bow.
In response, Iran did the smart thing, make impossible demands of its own.
The NACHO Trade
The new acronym for this is NACHO. Not a Chance Hormuz Opens.
NACHO has replaced TACO as the meme of the day.
Eventually the pain will be unbearable on someone. That someone is much more likely to be Trump, with unpredictable results.
Ultimately, Trump will have to make some preposterous lie, agree to open the strait and resolve uranium later, or put troops on the ground.
All three of those are losing options for Trump. Meanwhile, until that happens, inflation will keep rising.
The Long Bond Yield Is Signaling a Huge Fear of Inflation
Yesterday, I noted The Long Bond Yield Is Signaling a Huge Fear of Inflation
The 30-year long bond yield is just 17 BPs from a new 18-year high.
Today, there was no follow-through on yields. That means today’s disastrous PCE inflation report was expected and priced in.
But looking ahead, it’s very messy for bonds unless the NACHO trade unexpectedly vanishes.
Trump has no options but to force interest rates to push the DOW higher. After November he doesn’t care what happens to the economy or the US reputation or the people who voted for him. If the economy ‘visibly’ crashed before November he will not the House and Senate which the Dems are handing him on a plate. Think of how America will be like when he is 100% under the control of vile zionists.
The FRBNY has exclusive authority, as fiscal agent of the govt, to disperse funds from the auctions of Treasury securities which are govt funds and any relevant operation they wish to control. Annual funds run to $18 trillion and never been audited even in Annual Report to Congress. 31 CFR #375.3
Doesn’t GAO have standing authority to audit any handling of govt money ?
Trump fumes as Jerome Powell plots future at Federal Reserve
https://thehill.com/business/5858321-fed-chair-powell-trump-backlash/
“Iran is in pain over its oil wells. You can’t just stop them. Pressure drops they fill with water and other related problems.”
Iran probably is in economic pain over its oil wells, but not likely from physical damage unless by military activity. Oil wells are shut in frequently and do not fill with water because they are liquid (oil) filled and in order to fill with water the other liquid first has to be removed. Natural gas is compressible therefore water can displace some well volume but not fill the well. Oil wells have well heads and trees that are composed in large part with valves to shut them in for many reasons, servicing or downstream capacity as examples. In the Gulf of Mexico, wells are routinely shut in for precautionary measures during hurricanes and they restart.
As for their pipelines exploding from being clogged up, well, that reflects on Trump’s stupidity of the upstream oil business. Pipelines are routinely pigged to keep them clean, shutting them down also shuts down the source of clogging material. Viscous oils can become more viscous with lack of shear (movement) but to think these pipelines have not been shut down and restarted is fallacious. Surface wellhead pressures are kept at a minimum because that pressure is exerted all the way back to the flowing formation and higher back pressure means less pressure differential to the wellbore and less production. There are circumstances when the pressure can be high, but to exceed the pressure rating on the flowline is pretty much a pipe dream.
This oilfield garbage statement is hype for Trump’s jawboning his position.
April 26 plus three days, so Iran’s oil infra all exploded yesterday. Maybe Trump wants MSM to report this as fact LOL
The Fed SAYS they want 2. Given they allegedly have tools AND it hasn’t been 2 or below in eons, they only say it. There was no reason to lower rates in the fall of 2024 given how long they let inflation rage as rates sat near the zero bound during the “transitory” nonsense. They love the K shaped economy because they are benefitting personally from being in the up-and-to-the-right portion of said “K”. Those of us on the down-and-to-the-right aren’t so fortunate.
The Fed had been viewing, with alarm, many months of a deteriorating labor market, which is why they cut rates. The labor market improved quickly over the next few months. So either the Fed made a mistake because the labor market deterioration was transitory, or cutting rates gave business enough confidence to start hiring again. I personally believe it was the first, but no one is going to give a dam about what I believe on the topic. The point being that they did have cause to believe that they had tightened interest rates too much. History has proved them wrong, but the FRB had a bunch of smart folks who all came together on the subject to make that decision.
It’s Trumpflation time = stagflation caused exclusively by economically illiterate decision making. Stagflation in the 1970s was driven by exogenous shocks, this time it’s homemade. But the puzzle remains why the bond market doesn’t react to Trumpflation.
You know I’m really surprised Trump is sticking to the NACHO bit given he’s to meet Xi in china soon.
Does he think he has the cards to keep this up while asking, begging, China to agree to a trade deal?
I think the winner here is China honestly as Trump literally has no cards that will allow him to win. It be funny if after this meeting Trump walks away with his tail between his legs. That for sure prove Trump has no cards.
If that happens or not I guess that only leaves lying in the end, after all that’s what he’s mostly done throughout his presidency.
China adds more electrical generation capacity each year than most countries generate in a year. Last year they generated more electricity than the US, EU, and India COMBINED (Hat tip for both facts to Kevin Walmsley’s long form vlog yesterday).
China is laughing at us and allowing us to continue making this four year long mistake that is Trump. They are building 39 reactors, we are building 0 with nothing definitive in the pipeline. What could possibly go wrong?
He doesn’t have cards, he has a handful of old beer coasters that he has chewed the corners off of.
And it’s not only Iran. Trump has militarily interviewed in 10 countries in the last 15 months. Nothing near that has ever occurred before. Sargent Bonespur Chickenhawk is blowing up our budget and finances.
It is his greatest area of expertise
Wow, so Biden got inflation under control after Trump caused it the first time around and now Trump started back up again. When will people learn? Oh well midterms coming right up and Trump/GOP deserve 100% of the blame. Now how do I profit off of high inflation? hmmm……
https://www.youtube.com/watch?v=rRndMiVIB-w
Do worry, Trump will find a way to make things even worse.™
Wouldn’t it be interesting if somehow this escapade with Iran really got out of hand, and Trump issued emergency powers and from it stopped midterm elections?
That never happen now could it?
(and for the record im not saying he will, but given his track record)
That’s the most plausible thing I’ve ever heard
I always read your posts but here are the CPI numbers as I LOL’d on the Biden got it under control after Trump caused it. Why not just report the numbers?
2016 1.3 Last year of Obama (also the last year of 8 full years of ZIRP!)
2017 2.1 Trump
2018 2.4 Trump
2019 1.8 Trump
2020 1.2 Last year of Trump
2021 4.7 Biden
2022 8.0 Biden –> oh boy, look at him getting it under control
2023 3.8 Biden
2024 2.9 Last Year of Biden
2025 2.5 Trump
Well thanks for doing that and proving my point.
2020 was Trump’s spectacular screw up of the whole COVID situation which led to epic money printing. He started the first round of free money and his gross incompetence caused shutdowns.
And here we are again in 2024 with tariffs, this stupid Iran war, and who knows what idiotic thing he’ll do next.
Inflation up/down isn’t instant, it takes hold over time so just sit back and wait for the colossal inflation.
Now go do Bush Sr’s economic screw up then Bush Jr’s economic screw up then watch the video where Trump tells it to you like it is.
8.0 down to 2.9 seems to be getting it under control, especially with the Fed deciding to let inflation run a little hot. Of course, Biden owns the 3rd COVID relief package. The first 2 tranches belong to the Orange Julius Caesar.
Inflation isn’t something the president can turn on and off like a faucet. Had JPow had the balls of Paul Volcker he could have set the Fed Funds Rate a few percentage points above inflation and put it out quickly. But that wouldn’t have been good for stonks.
Yes, the Fed takes a lot of the blame for the disastrous inflation of that era (and now). But not all. Congress didn’t help with their addiction to deficit spending either. The President actually had less to do with it but both Biden and Trump signed those spending bills.
Bill your grasp on the passage of time needs serious work
That’s hilarious. Best laugh all day.
Glad you laughed at numbers that came right from the Fed. You can add more years if you’d like. Appreciate that my passage of time needs work…not sure how laying down the numbers for 10 years needs work but more years can be pulled. Also liked the comment that 8 down to 2.9 was getting it under control as if going from 4.7 to 8 can be ignored.
The point of my comment to Mr. Exit Strategy is, rather than trying to hypothesize who causes or fixes and how much of a lag is acceptable to argue–I’ve not heard a cogent argument in decades as to how much time passes before the economy is owned by the next in line–why not just report the numbers as they stand. The numbers are bad for decades, and arguable underreported.
On this blog comment section I hear Trump is going to force rates lower and in reality he has not done so it’s all just orange-man-bad hype. He’s going to issue an edict. Rates rose for much of his first term prior to the last 9 months when covid rolled in. Obama had 8 years of 0%, Biden about 2 1/2. Yet the blog commenters prattle on that Trump will force them lower. He WANTS them lower. The Fed wants inflation lower. Good luck to both of them.
GOP just needs to tell their voters that Democrats eat dogs and cats to win an election. I don’t expect things to improve any time soon.
These countries will suffer the most damage from shut-in oil fields because they have been almost completely shut-in for many weeks now:
Kuwait, Qatar, Bahrain
Next worse off is Iraq. Followed by Saudi Arabia and UAE.
Iran will suffer some damage, but far less than the countries above. This is because they have not yet filled up their storage, and are still exporting some oil.
Oman is the only country that will get through this with little damage as their exports are mostly from outside the Gulf.
So if pipelines are going to “explode”, look to Kuwait, Qatar and Bahrain.
In the long run, whatever damage is done will reduce future shipments from the Persain Gulf, and help oil companies in the rest of the world. Especially US and Canadian companies.
The lack of other materials will likely tank the whole AI. Lots of microchips get made in Asia and they have no fuel. What a total mess created by total morons.
The US has no idea how to adequately power its AI Data centers, which is why the majority of them are canceled or delayed (2025+2026). Now we are diverting LNG to foreign markets, LNG that should be powering the AI data “revolution”
The billionaire welfare queens are already driving up utility costs wherever these data centers have gone in, all the while being subsidized by the taxpayer.
There is a reason people dislike them and it’s not jealousy – they are looting the public with the collaboration of government from federal down to local level.