CPI Report Spurs Fed's Likely 25 Basis Point Rate Cut | Episode 171 | 09-11-24

How does the latest Consumer Price Index (CPI) report impact the Federal Reserve's next move on interest rates? Discover the Fed’s likely decision to opt for a 25 basis point rate cut instead of a 50 basis point cut. With the persistent inflationary concerns, particularly within the core CPI that excludes volatile food and energy prices, and the stubbornly high costs in the services sector and housing to the fluctuating airline fares and used car prices, host Megan breaks down the data and what it implies for economic policy and your wallet.

Watch for other critical reports coming this week, including the Producer Price Index (PPI) and import/export prices, and what these indicators reveal about the future economic landscape. The Fed's cautious approach amidst ongoing inflation trends underscores the need for a measured response. Don't forget to subscribe for more in-depth insights into the factors shaping our economy.

Inflation surely does not want to make the Fed's job any easier for them. It is Wednesday, eptember the 11th, and we received the August Consumer Price Index that most people have been looking for to get an indication on whether or not the Federal Reserve would cut interest rates by 25 basis points or 50 basis points at their meeting next week. And what this proved to us is that it's most likely going to be a 25 basis point rate cut. The reason being is, while it came in relatively in line with expectations, when we look at the core level that level that's excluding out food and energy that actually was a little bit higher than what was expected Not a lot. It was up three-t tenths of a percent after an expectation of two tenths, and also two tenths the last month. On a year over year basis, it also came in line as expected. At the core level, we're growing 3.2%.

There are some people that are focusing on the headline number, which is now growing two and a half percent compared to 2.9% in the last month's reading. However, that's not what we're focused on and that's not what our pocketbooks are focused on. We're focused on that, excluding the volatile items. So when you look into this and you look at some of the items that are still causing problems for consumers again. Services this continues to be an issue. Services are still growing about 4.3% on a month-over-month basis. It jumped up to 0.5% in August. So on a year-over-year basis, owner's equivalent rent, which is basically a housing proxy, is growing 5.4%.

There have been a lot of reports about how we should have seen this start to decelerate at a much faster pace by now, and we just haven't seen that. So the Fed will pay close attention to that. Some of the other areas airline fares jumped up again, but used cars now are lower by 1%. Recreation, and then obviously some of the fuel and commodities with that energy component. Now, what does this mean? We'll get a couple more reports this week. We'll get the PPI report tomorrow and then we'll get important export prices on Friday. For us, as we said, it means the Fed can go 25 basis points instead of 50, and they should go 25 basis points instead of 50. Inflation is getting in the right direction, but it's very stubborn getting there. So the Fed needs to be very careful and not completely forget about what we're seeing here in some of these inflation data. That's all we have today. If you liked this. Please subscribe to us. Hit that alarm bell. If you would like to see any of our historical podcasts, you can go to marketswithmegan. fm. Thank you.