BREAKING: Inflation COOLS, Fed RATE CUT IMMINENT

Summary

The 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

00:00

📈 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.

05:00

🚗 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.

10:03

🌪️ 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.

15:04

🏠 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.

Keywords

💡Inflation

Inflation refers to the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. In the video, inflation is a central theme as the discussion revolves around the release of the Consumer Price Index (CPI) numbers, which are key indicators of inflation. The script mentions a year-over-year inflation rate below 3% for the first time since March 2021, indicating a potential easing of inflationary pressures.

💡Consumer Price Index (CPI)

The Consumer Price Index is a measure that tracks the weighted average of prices of a basket of consumer goods and services, providing a data point on the rate of inflation. In the script, the CPI is highlighted as it has risen by 2/10 of a percent, which is a significant data point in the discussion about the state of the economy and the impact of inflation on consumers.

💡Federal Reserve

The Federal Reserve, often referred to as the Fed, is the central banking system of the United States. It plays a crucial role in setting monetary policy, including interest rates, which influence economic factors like inflation and employment. The video discusses the Fed's potential actions, such as rate cuts, in response to the inflation data, which could have profound effects on the economy.

💡Interest Rates

Interest rates are the cost of borrowing money and are set by central banks like the Federal Reserve. They are a key tool used to manage the economy. In the context of the video, interest rates are discussed in relation to potential Fed actions, such as a rate cut, which could stimulate the economy by making loans cheaper and thus encouraging borrowing and spending.

💡Year-over-Year

Year-over-year comparisons are analyses that compare data from the same period in two different years, often used to identify trends or changes over time. The script uses year-over-year data to discuss the changes in the CPI and inflation rates, highlighting the significance of the current inflation figures in comparison to those from previous years.

💡Shelter Costs

Shelter costs refer to the expenses associated with housing, including rent, mortgage payments, and related costs. In the video, it's mentioned that shelter costs are still increasing, which is a significant concern for many as it directly impacts the cost of living. The script discusses how these costs are still high despite a slowed rate of increase.

💡Car Insurance

Car insurance is a type of insurance policy that covers financial losses resulting from traffic collisions or other incidents involving a vehicle. The video script notes a significant increase in car insurance rates, which is a burden for many households. It's discussed as one of the essential services that have seen substantial price increases, affecting consumers directly.

💡Essential Services

Essential services are those that are crucial for daily living and well-being, such as utilities, healthcare, and food. In the context of the video, essential services like car insurance, water, sewer, and trash collection are highlighted as areas where costs have increased significantly, impacting the household budget of many consumers.

💡Climate Change

Climate change refers to long-term shifts in temperatures and weather patterns, often attributed to human activities such as the burning of fossil fuels. The video script mentions climate change as a contributing factor to increased auto insurance rates due to more frequent and severe weather events causing damage to vehicles.

💡Public Option

A public option refers to a government-provided service or program that competes with private sector alternatives. In the script, the concept of a public option for car insurance is discussed as a potential solution to the rising costs of private insurance, which could make coverage more affordable and accessible.

💡Labor Unions

Labor unions are organizations that represent the collective interests of workers and negotiate employment contracts. The video discusses how the decline of labor unions has affected wage growth and its traditional feedback loop with inflation. Unions used to play a significant role in driving wage increases based on the cost of living, which is less common in the current economic landscape.

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

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