BREAKING: Inflation COOLS, Fed RATE CUT IMMINENT
Summary
TLDRThe video discusses the latest inflation numbers, noting a 2.1% rise in the Consumer Price Index (CPI) year-over-year, the first time below 3% since March 2021. The conversation explores potential Federal Reserve rate cuts, with implications for the economy, including mortgage rates. It also addresses the impact of high inflation on essential services like car insurance, rent, and utilities, and how these costs vary by region. The discussion touches on political reactions, the role of climate change in insurance costs, and the need for a public option for car insurance amidst rising premiums.
Takeaways
- 📈 The July Consumer Price Index (CPI) showed an increase of 2/10 of a percent, indicating a positive change after a significant negative month-over-month change previously.
- 🔍 The year-over-year inflation rate has decreased for the first time since March 2021, raising questions about the Federal Reserve's next move regarding interest rates.
- 🏛️ There's a debate on whether the Fed will opt for a quarter-point or a half-point rate cut, with the latter signaling a more significant monetary policy shift.
- 🚗 New and used car prices have decreased, which is a significant development considering the high costs faced by many families.
- 🏠 Shelter costs continue to rise, albeit at a slower pace, which is a critical factor affecting people's budgets.
- 💼 The potential for a rate cut could be influenced by the upcoming jobs report, with expectations of a softer report possibly leading to a more aggressive rate cut.
- 🌐 The discussion highlights the political implications of the Fed's decisions, especially in the context of the upcoming election and the potential for it to be seen as influencing electoral outcomes.
- 📉 Essential services like car insurance, child care, and utilities have seen significant price increases, impacting consumers heavily.
- 🌎 The conversation also touches on the role of climate change in driving up insurance costs, with extreme weather events contributing to higher premiums.
- 🏢 The high costs of housing and essential services are a key reason why people might feel the economy is doing well on paper but are struggling in reality.
Q & A
What was the July Consumer Price Index (CPI) headline number?
-The July CPI headline number came in as expected, up by 2/10 of a percent.
What was the year-over-year inflation rate mentioned in the script?
-The year-over-year inflation rate was less than 3% for the first time since March 2021.
What are the implications of the CPI numbers for Wall Street?
-The CPI numbers could influence Wall Street's reaction and potentially lead to a rate cut by the Federal Reserve, with the discussion focusing on whether it will be a quarter or half-point cut.
What is the current Federal Reserve rate mentioned in the script?
-The script mentions the Federal Reserve rate is currently at 5.3%.
How might a rate cut impact the economy according to the script?
-A rate cut could lead to more money flowing into the economy, easier access to loans, and potentially lower mortgage rates, which could save people hundreds of dollars on their mortgage payments.
What role might the September jobs report play in the Federal Reserve's decision-making?
-The September jobs report could influence the Federal Reserve's decision on interest rates, as a soft report might lead to a rate cut.
What is the political stance of Trump regarding the Federal Reserve's rate cuts as mentioned in the script?
-Trump is against rate cuts by the Federal Reserve and has expressed a desire for a market crash to aid his re-election campaign.
Which areas of the CPI are still increasing and causing financial strain on people?
-Shelter costs, car insurance, child care, water, sewer, and trash costs are still increasing and causing financial strain.
How has the increase in car insurance been linked to climate change in the script?
-The script suggests that storms and extreme weather, which are linked to climate change, have been significant drivers of damage to vehicles, leading to higher insurance rates.
What is the potential solution discussed in the script to address the rising car insurance costs?
-The script discusses the possibility of a public option for car insurance as a potential solution to the rising costs.
What is the significance of the CPI numbers being below 3% year-over-year for the first time since March 2021?
-This indicates a slowing of inflation, which is seen as a positive economic sign, but the script also highlights that other cost increases, such as housing and essential services, are still a concern for consumers.
Outlines
📈 Inflation Numbers and Their Impact on the Economy
The video script discusses the recent release of inflation numbers, focusing on the Consumer Price Index (CPI). The headline CPI increased by 2/10 of a percent, following a 1.1 percent drop, marking the first time it has risen since April 2020. The year-over-year inflation rate has dropped below 3% for the first time since March 2021. The discussion includes the potential reactions from Wall Street and the Federal Reserve, with speculation on whether there will be a rate cut and the implications of such a decision. The conversation also touches on the political aspect, with comments on Trump's stance on the Fed's actions and the potential impact on the election.
🚗 Rising Costs and Their Effects on Daily Life
This paragraph delves into the specific areas where consumers are experiencing increased costs, such as car insurance (up 40%), child care, water, sewer, and trash services. It highlights that while some costs like food and energy have stabilized, others like rent and car insurance continue to rise. The discussion points out the uneven impact of these increases across different regions and populations, with essential services remaining a significant burden for many. The conversation also addresses the role of climate change in driving up insurance rates and the need for a potential public option for car insurance to mitigate the negative effects on consumers.
🌪️ Climate Change and Its Financial Ramifications
The script addresses the connection between climate change and the increase in car insurance rates, attributing a portion of the rise to severe weather events causing more vehicle damage. It also discusses the role of electric vehicles in insurance costs and the ease with which certain car models, like Kias and Hyundais, are stolen, contributing to the problem. The conversation suggests that creating deterrents to car theft and addressing the design of vehicles could help reduce insurance premiums. It also touches on the broader implications of climate change on property and flood insurance, hinting at the need for public policy responses to these challenges.
🏠 Housing Costs and the Outlook for Economic Relief
The final paragraph discusses the persistent issue of rising housing and rent costs, which are not showing signs of decrease despite other areas of the economy showing positive signs. It suggests that if the Fed lowers interest rates, it could help alleviate housing costs by making loans cheaper and enabling more housing construction. However, it also acknowledges the potential for this to lead to wage inflation. The conversation reflects on the historical role of unions in wage negotiations and how the current economic landscape, shaped by neoliberal policies, has altered this dynamic. The script concludes with a call to action for viewers to engage with the content and consider the broader economic implications discussed.
Mindmap
Keywords
💡Inflation
💡Consumer Price Index (CPI)
💡Federal Reserve
💡Interest Rates
💡Year-over-Year
💡Shelter Costs
💡Car Insurance
💡Essential Services
💡Climate Change
💡Public Option
💡Labor Unions
Highlights
Inflation numbers are released, showing a 0.2% increase in the Consumer Price Index (CPI).
Rick Santelli's commentary on the CPI is highlighted, emphasizing the positive change from the previous month.
Year-over-year inflation increase is less than 3% for the first time since March 2021.
Discussion on Wall Street's reaction to the CPI release and the potential impact on interest rates.
The Federal Reserve's rate cut decision is anticipated, with speculation on the magnitude of the cut.
The potential influence of the September jobs report on the Federal Reserve's decision-making.
Trump's public stance against Federal Reserve rate cuts and its political implications.
The duality of economic indicators showing a 'good' economy while many individuals struggle financially.
Shelter costs continue to rise, impacting many people's budgets significantly.
New and used car prices are decreasing, which is a significant change from previous trends.
Food prices are still increasing, adding to the financial burden on consumers.
Car insurance rates have soared by 40%, affecting almost every driver.
Essential services like water, sewer, and trash costs are still increasing.
The role of climate change in driving up auto insurance rates is discussed.
The ease of theft of certain car models and its contribution to higher insurance rates.
The potential need for a public option for car insurance due to the increasing costs.
The importance of the upcoming jobs report in influencing Federal Reserve decisions.
The historical context of wage growth and inflation, and how it differs from the 1960s.
The potential positive outcomes if interest rates are lowered, such as reduced mortgage costs.
Transcripts
all right so we actually have the
inflation numbers out right now just as
we were talking uh these numbers were
released uh Ryan should we start with
the Republican spin because I know we
have an element of that uh it's Rick
Santelli of course that was already
clipped and posted by the official
Republican party X account let's roll
this clip right now for the July
Consumer Price Index headline number
coming in as expected up 2/10 of a
percent up 2/10 of a percent on Headline
number follows yet unre Vis down 110 so
we went from basically the weakest the
biggest negative uh month over Monon
change uh the a positive in CPI since
covid 420 42020 and now we're at a level
that we haven't seen really since April
when we're up at 310 if you look at X
food and energy exactly as expected as
well up 210 the issue is of course it's
following 1110 which just like the last
number was comping towards the first
several months of covid okay so that's
the Republican spin immediately upon the
numbers being released but Ryan let's
get into some of these numbers and
actually what they are because uh it's
the first year over-year uh being less
than 3% of an inflation increase the CPI
here uh first year-over year since March
of 2021 so year-over-year the first time
that it hasn't been uh over 3% 3% or
higher since March of 202
Right In the Heat of the pandemic how do
you think wall Street's going to react
to this because they were as the New
York Times put it quote on edge uh ahead
of the CPI being released which is
always the case yeah and they they were
this is a it beats Expectations by a
little bit yeah um last month also beat
Expectations by a little bit so that's
two two months in a row uh the big
question that uh Wall Street is going to
have and that all of us are also going
to have because it matters to us as well
is whether whe there will be a rate cut
next month from the Federal Reserve um
but this number seems to move that
question to what kind of rate cut uh
we're going to have is it going to be a
quarter point which is the the kind of
normal State of Affairs for the FED to
cut or is it going to be a half-point
cut uh and this pushes the possibility
of a half-point rate cut um closer to
closer to happening I think rates are
the the FED sets it's current rate I
think
5.3% but a half point a half point cut
um would dramatically would send a
dramatic signal that uh there's going to
be more money FL flowing into uh the
economy that loans are going to be
easier to get uh and then you and then
you will start to see you know long
you're already seeing interest rates
coming down interestingly over the last
several months like 30-year mortgage
rates coming down this would send
mortgage rates significantly down which
means you know 500 to a th000 bucks or
more off of a mortgage payment for
people who either refinance or or
purchase at the exact same price do you
think that potential do you think the
potential rate cut is going to depend on
the jobs report September early
September it's like September that'll
play a role um um and that'll probably
be soft uh which means that it probably
will not they will probably not have
added as many jobs you know as as they
had in previous months and and that then
will further induce the FED to cut rates
now the the politics of this are such
that Trump is probably going to spend
the next several weeks brow beating the
FED um not to cut rates um you know he
has said that he wants he wanted a
market crash and he wants no fed Fed
rate Cuts like in order to help his his
re-election campaign and it's delightful
for us as political reporters that he
just says the stuff out loud no but
really that's what that's what all
candidates who are opposing the
incumbent want but he just says it out
loud you don't need any truth serum like
we never needed MK Ultra we just needed
Trump he just says it it's all he ever
needed tweets it out yeah um he got his
market crash but then immediately kind
of rebounded over the next several days
uh and so that and that market crash
also probably also woke up the FED a
little bit the the reporting around
Pal's thinking on this the FED share is
that he doesn't want the FED to appear
political by coming in and and yeah it
would be Trump will accuse him of being
political and accuse him of kind of
biasing the the Electoral results
towards Democrats if pal thinks that
Democrats are going to win
anyway know that kind of gives him more
reason obviously everybody is political
so if he thought when it was Trump vers
Biden and it looked like Trump was going
to win like New Mexico and Minnesota
yeah and your pal then you're like you
know what not going to tick this guy off
but if it looks like Trump's going to
lose anyway and and you are at you are
risking the the soft Landing that you've
been going for which is which would be
your legacy like if he if he can if he
can oversee this spike in inflation
around the um around the
pandemic and then bring the and then
bring inflation back down to the 2%
range while keeping unemployment at the
3 to 4% range and not going into
recession that would that would be a
legacy for a Fed share that you that he
would go around and give speeches about
and people write books about him and get
some money for those speeches too and if
but if he holds rates too high for too
long he risks sending the economy
spiring into a
recession which then under which then
undermines his whole Legacy um but
what's interesting about the the GOP
spin that we played at the top is that
that's also true in some ways it's it's
a it's a it's a case where what both
sides are saying is true so you want to
run through some of this yeah I was
going to say let's get into that because
in this CPI uh shelter costs are still
going up so it's a half percent but
that's still significant because that's
one place that is absolutely crushing
people we'll get into that in a moment
uh new and used cars are going down that
has been a hugely significant uh expense
for a lot of families food prices still
going up in the CPI uh now if we put
this element up on the screen it is a
long Wall Street Journal report on
basically picking apart where people are
still getting hit really hard from
inflation and these some of these
numbers are truly insane car insurance
is still up like 40% Child Care water
sewer trash costs some of these like
very essential Services still up uh rent
and electricity up
10% um so consumer prices overall since
June of 2022 are up 6% car insurance I
think I already went that said that one
40% at shelter costs are yeah rent I
already mentioned that but shelter
overall it's another metric that they
they measure separately still really
high there are things that have gone
down cable
shampoo uh there are some kind of random
places where uh people have seen Cooling
and that's all true but if you can
imagine um across the board I mean some
of these depending on how people live
and where they live it's a little bit
uneven some of that matters and if
you're in a city like Child Care super
super high in cities right now not going
down uh doesn't show any signs of going
down so it's it's being experienced
differently in different pockets of the
country but some of these things like
40% increase in car insurance prices
almost everybody is feeling that I mean
you just almost everybody's feeling that
increases in essential services those
are things that everybody is feeling and
they're not showing any signs of going
down at all it's not a good sign that
the shelter costs are still increasing
even if it's a slowed rate of increase
right so you look at these numbers and
you have the answer to the question of
why do we have a quote unquote good
economy which is low unemployment and
low inflation good market and then a
booming stock market uh yet my life is
miserable like how on Earth are all of
those things true and the reason they're
true is what you what everybody kind of
intely gets rent and housing uh is
through the roof since the pandemic
energy costs your power bill um are
through the roof and car insurance that
those basically those and you know food
prices have gone up and haven't come
down so like even though they're no
longer going up you know they're up and
and wages have kept up with food prices
but if you throw in rent and uh you
throw in the car insurance you throw in
the electric bill um you're way behind
from what what you used to be and so
just looking at some of the BLS numbers
from this month so transportation
services which includes um car insurance
Ubers and lifts and cabs and all that
stuff way up um still still rolling at
88.8% which is which is rough and that
that is you know partly because used
cars and trucks are and and new vehicles
were so significantly up uh like you
said they're now coming down so used
cars and trucks are down
10.9% yeah year-over-year but that's
because they went up they were up really
high a massive number yep the more
expensive new and used cars are the more
expensive it is to replace them the more
expensive your insurances now um bunch
of people uh who watch this show uh were
mad at me for saying that climate change
is one of the drivers of why auto
insurance has gone up so much in the
last couple of years and this Wall
Street Journal article just confirms
that once again insurance and maybe
maybe the insurance companies are lying
and their data is completely faked and
it's fake news uh but they say uh that
storms and crazy weather have been a
significant drivers in recent years of
damage to vehicles and as a result of
higher insurance rates and you can go
ahead and say say that maybe the the
storms and you know all the crazy
weather has nothing to do with climate
change but uh that's not what climate
scientists believe and the numbers are
showing what they're showing I the rise
of electric vehicles playing a role here
too like you get in a car accident with
an electric vehicle that's that sucker
is total a lot faster MH um plus uh you
cannot underrate the role of what Kia
and hyundi
um of selling millions of cars that are
easy to steal like this is an under
toold story okay yes but then also the
cities that are wildly over permissive
of the stealing of those cars that's
that's fine but if you create cars if
you produce cars you should yes that you
can just walk into and drive away yes
they should not have done that and
refuse to stop doing that after it's
called to your attention like the the
the number of car thefts that are
directly connected to Kia and hyand
making cars that are easy to steal
mostly to the people thieving first and
foremost connected to the people
stealing the cars that are easy to steal
right but if if you make it harder to
steal it's a deterrent no question about
it no about it like you you tighten that
up and they're going to be fewer cars
stolen but it it's it's a complete be
and so the other spiraling effect here
is as car insurance gets more expensive
fewer people acquire it even if the law
says you're supposed to have it what
does that do that drives up the cost of
insurance for people who do have the
insurance because now if you get into a
car accident the chances that you hit
somebody uh that doesn't have insurance
have gone up yeah and so like at some
point it feels like we're going to need
a a uh public option here like the car
insurance
like because this is going the the wrong
direction cuz every percentage increase
that you have in car insurance costs is
going to mean a higher percentage of
people without car
insurance um we should do a whole
segment on that which which then drives
car insurance prices higher that's
interesting we should we should do a
whole segment on that some so you're
yeah you're you're paying yeah and if
you're not going to solve climate change
then the public option for car insurance
this before we get to um property
insurance flood insurance like which I
don't think anybody's going to quibble
with me about that being related to
climate change not even Trump who in his
conversation with Elon Musk said listen
I maybe it'll create more ocean front
property for me it's not happening but
it'll create more oceanfront property
yeah uh but I mean these so it's to your
point about the kind of Duality here
that the Republicans been I probably
shouldn't have even been laughing and
and mocking the Republicans SP because
it is tackling something really real uh
there's The Duality of that and good
news so it's like there's good news
there's bad news but um overall still
just bad news for everybody because
there's no sign like well it's it's I
guess good that we're below 3% since for
the first time year-over year since
March of 2021 yeah I guess that's that's
good news um on the other hand it's hard
to see this kind of uh what's the best
way to put it the Titanic being turned
around here uh because even these good
things we don't have an answer to the
housing costs and there's an interesting
quote in the journal article where a guy
says yeah gas prices are cheaper but I'm
not feeling it in my budget because the
other things have gone up basically you
know gas prices can go down uh cable
prices can go down which I honestly
don't even believe I like I don't know
how they're getting that cable number
because cable prices went so through the
roof because of the pandemic that's true
that's true like cars and yeah yeah
because everybody was at home um but
people The Wall Street Journal article
is good people should read it and you
can by the way you can just take the
journal article and go to
like not that I would tell anybody to do
this because maybe it's illegal to tell
them but it is possible to go to like
archive.is and put the Wall Street
Journal Link in there and you would
never I would never suggest such a thing
um but if you do that you can find an
archived version that goes around the
pay wall um but we don't recommend it
well ABS that'd be terrible yeah who
would ever do such a thing not our
viewers and don't do it to dropsite
either well drop say everything's free
there that's right so charitable man
that's right um the only thing you get
if you subscribed you can comment that's
cool and the the goal of that is
actually just so we don't have to
moderate the comment section because we
figure if somebody's paying to subscribe
that they're not going to be a terrible
troll in the comments well as we learned
at Federalist that'd be a weird way to
spend your money but it's a good way to
do it because as we learned at the
Federalist a few years ago uh they will
come after you if people say crazy
things in your comments and demonetize
you threaten to demonetize you on Google
ads which basically means you can't run
a news business do not do that internet
business yes so uh good that is a great
way to do comments so the but the good
news if we're going to finish it on that
is if if the FED does lower interest
rates and that brings down the price of
mortgages then that can help with rent
and and housing costs like that that is
a path out of this and if you can make
it easier to borrow money you can build
more housing now you have to deal with
the nimi problem but obviously there's
prices elsewhere that get affected by
that too which is why the job report is
probably pretty important right there
decision right the concern is that if
you lower interest rates the economy is
going to grow wages will grow and wages
will produce inflation as pal has said
um the connection between wage growth
and inflation is is much more tenuous
than it used to be in the 1960s partly
because there aren't Union like back in
the 60s you had unions who had contracts
and made up like 40% of the workforce
that if that they would get raises based
on the cost of living increase that the
federal government produced through its
through these numbers and so then the
federal government would say oh cost of
living was 7% Unions would get an 8%
raise and then that would drive 8% the
next year and then Unions would get 9%
so it had this like feedback effect
which thanks thanks to neoliberalism
Breaking labor unions we don't have that
feedback effect anymore so now it it
actually seems like interest rates play
a more significant role High interest
rates play a more significant role in
driving prices up and make and costing
people more um than they do in in
slowing slowing or growing the economy
interesting yeah we'll see yeah we'll
see the journal article is worth your
time uh if you're able to read it hey if
you liked that video don't forget to hit
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