Inflation Came in Hotter than Expected

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Source: Bloomberg
The latest reports from the BLS indicate that both the consumer price index (CPI) and producer price index (PPI) rose last month. Here’s a breakdown of the numbers:
  • CPI inflation rose to 3.2% year-on-year, growing 0.4% month-over-month
  • Core CPI inflation grew 0.4% month-on-month, but declined slightly to 3.8% year-over-year, the lowest level since May 2021.
  • PPI inflation – the measurement of pipeline costs for raw, intermediate, and finished goods – jumped 0.6% on the month, double the Dow Jones estimate.
  • On a year-over-year basis, the PPI index increased 1.6%, the biggest move since September 2023.
Our take
We won’t sugarcoat it for you. While it’s not a reason to panic, both of these reports are worse than we expected. While inflation has been easing, the latest CPI and PPI numbers suggest that progress is stalling, or possibly even reversing. It is too soon to tell, but it definitely means that the Fed will not be cutting rates anytime soon, and that mortgage rates will probably rise in the near term and remain elevated for longer. Again, not the news we wanted to hear.

 

James and David, The Blueprint

March 15, 2024