BREAKING NEWS: CPI Inflation Report Released! | Here's What You Need to Know

Summary

The latest CPI inflation report was released, showing headline inflation at 3.4%, slightly better than the previous 3.5% but still above the Federal Reserve's 2% target. Core inflation, which excludes food and energy, improved marginally from 3.8% to 3.6%. Despite this, the report does not provide enough confidence for the Federal Reserve to cut interest rates in June, with the odds dropping to 3.1%. The report also highlighted that energy prices have risen by 2.6% year-over-year, food prices are up by 2.2%, and shelter inflation has decreased to 5.5%. Services inflation, a key concern for the Federal Reserve, has slightly decreased from 5.4% to 5.3%. The labor market, though reported as strong, is experiencing a slowdown with fewer jobs added in April compared to March. The market is now slightly more optimistic about a rate cut in July, but the odds remain low, and predictions for September are uncertain. The speaker rates the report as a three out of five stars, suggesting it's not terrible but not great either.

Takeaways

• 📉 The Federal Reserve is unlikely to cut interest rates in June, with the odds falling to 3.1% from 3.3% previously.
• 🔍 The Consumer Price Index (CPI) report shows headline inflation at 3.4%, slightly better than the previous 3.5%, but still not enough to convince the Federal Reserve to cut rates.
• 📈 Core inflation, which excludes food and energy, has improved from 3.8% to 3.6%, but it's still significantly above the Federal Reserve's 2% target.
• 🚫 The report suggests that it will take longer than two years to bring inflation down to the target level, indicating slow progress.
• ⭐️ The speaker gives the CPI report a three out of five-star review, stating it's not terrible but not great either.
• 📊 Energy prices have increased by 2.6% year-over-year, a significant rise from negative growth earlier in the year.
• 🍲 Food prices are reported to be up by 2.2% year-over-year, but the speaker questions the accuracy of this figure due to changes in calculation methods.
• 🏠 Shelter inflation has decreased from 5.7% to 5.5%, but it's still not reflective of true market prices and is well above the target rate.
• 💼 Services inflation has slightly decreased from 5.4% to 5.3%, but remains a concern as it's linked to wage inflation, which the Federal Reserve aims to keep below 2%.
• 📈 The labor market is reported as strong, but the speaker's personal observations and anecdotes suggest a weakening job market with friends facing unemployment.
• ⏳ The market is slightly more optimistic about a potential interest rate cut in July, with the odds increasing from 26% to 29% after the inflation report.

Q & A

What was the significance of the CPI inflation report released today?

The CPI inflation report released today is significant because it influences whether the Federal Reserve will consider cutting interest rates in June. The report did not show the phenomenal improvement needed for a rate cut in June, leading to a decrease in the odds of such a cut happening.

What is the current odds of the Federal Reserve cutting interest rates in June according to the CME FedWatch tool?

The current odds of the Federal Reserve cutting interest rates in June, as per the CME FedWatch tool, have fallen to 3.1%.

What was the reported headline inflation rate in the CPI report?

The reported headline inflation rate in the CPI report was 3.4%, which is slightly better than the previous rate of 3.5%.

How has core inflation, which excludes food and energy, changed in the latest CPI report?

Core inflation has improved from 3.8% in the prior month to 3.6% in the latest CPI report.

Why does the progress in reducing core inflation to the Federal Reserve's target of 2% seem slow?

The progress is considered slow because it has taken 8 months for core inflation to fall by only half a percent, indicating it will take longer than 2 years to reach the target.

What is the speaker's overall rating of the CPI report?

The speaker rates the CPI report as a three out of five stars, stating it is not terrible but also not a great report.

How did energy prices change year-over-year according to the CPI report?

Energy prices have increased by 2.6% year-over-year, which is an acceleration from the previous month's 2.1%.

What is the reported year-over-year increase in food prices?

The reported year-over-year increase in food prices is 2.2%, which has remained consistent for a few months.

Why might the reported food price inflation be questioned?

The reported food price inflation might be questioned because the government changes the way it calculates inflation, which can affect the reported numbers. For instance, items like cans of ground coffee were removed from the calculation.

What is the current state of shelter inflation according to the CPI report?

Shelter inflation has decreased from 5.7% to 5.5%, but this figure does not reflect true market prices due to the inclusion of old leases in the calculation.

What is the current situation with services inflation and how does it relate to wage inflation?

Services inflation has slightly decreased from 5.4% to 5.3%. However, it remains a concern because it is associated with wage inflation, which the Federal Reserve aims to keep below 2% to align with their target.

What are the current odds of the Federal Reserve cutting interest rates in July and September?

After the inflation report, there is a 29% chance of the Federal Reserve cutting interest rates in July and a 70% chance by September. However, the speaker advises not to take these odds too seriously for the September meeting due to its distance in time.

Outlines

00:00

📈 Federal Reserve's June Interest Rate Decision Impacted by CPI Report

The latest CPI inflation report shows headline inflation at 3.4%, slightly better than the previous 3.5%, but still not enough to convince the Federal Reserve to cut interest rates in June. Core inflation, excluding food and energy, has improved from 3.8% to 3.6%, but this slow progress indicates it will take more than two years to reach the 2% target. The report suggests a lack of confidence in immediate rate cuts, with odds for a June cut falling to 3.1%.

05:02

🏠 Shelter and Services Inflation Remain High

Shelter inflation has decreased from 5.7% to 5.5%, yet remains far above the 2% target due to the smoothing effect of old leases. Services inflation, influenced by wage inflation, dropped slightly from 5.4% to 5.3%, still significantly above the Federal Reserve's goal. The labor market shows signs of weakening with fewer jobs added in April and a rise in the unemployment rate to 3.9%. Personal observations suggest that the job market may not be as strong as reported.

10:02

🔮 Future Outlook on Interest Rate Cuts

Despite the slight cooling of inflation, the market remains pessimistic about a July rate cut, with only a 29% chance according to the latest report. The September meeting holds a 70% chance for potential rate cuts, but predictions this far ahead are unreliable. The overall sentiment is cautious optimism, acknowledging the report's mediocrity and its insufficient impact on the Federal Reserve's decision-making.

Keywords

💡CPI Inflation Report

The Consumer Price Index (CPI) Inflation Report is a key economic indicator that measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. In the video, it is crucial because it influences the Federal Reserve's decision on interest rate adjustments. The report's release is described as 'very important' for its potential impact on whether the Federal Reserve will cut interest rates in June.

💡Federal Reserve

The Federal Reserve, often referred to as the Fed, is the central banking system of the United States. It plays a significant role in setting monetary policy, including interest rates, which in turn affects economic activity. In the context of the video, the Fed's potential to cut interest rates is central to the discussion, as it responds to the CPI inflation report's findings.

💡Interest Rates

Interest rates are the cost of borrowing money and are set by the Federal Reserve to influence economic activity. Lower interest rates can stimulate the economy by making borrowing cheaper, while higher rates can slow it down. The video discusses the expectations around the Fed's potential to cut interest rates in response to the CPI report, which has implications for economic policy and individual financial decisions.

💡Core Inflation

Core inflation is a measure of inflation that excludes the more volatile food and energy prices. It is considered a more accurate reflection of underlying inflation trends. In the video, core inflation is highlighted as having improved from 3.8% to 3.6%, yet it is still well above the Federal Reserve's target of 2%, indicating ongoing inflationary pressures.

💡Energy Prices

Energy prices refer to the costs associated with the consumption of energy resources like oil, gas, and electricity. In the video, it is mentioned that energy prices have increased by 2.6% year-over-year, which is a significant rise from negative values earlier in the year, contributing to the overall inflation rate.

💡Food Prices

Food prices are the costs of purchasing food items. The video discusses how the reported food price inflation of 2.2% year-over-year may not fully reflect the actual increases in the cost of food, as the government's method of calculating inflation can change, affecting the reported figures.

💡Shelter Inflation

Shelter inflation reflects the changes in the cost of housing, including rent and the price of buying a home. The video points out that while the reported shelter inflation has decreased slightly from 5.7% to 5.5%, it does not accurately represent current market rates due to the way it is computed, and it remains a significant concern due to its impact on home affordability.

💡Services Inflation

Services inflation measures the changes in the prices of services, which can include healthcare, education, and entertainment. It is tied to wage inflation, as higher wages can lead to higher service costs. The video notes that services inflation has only slightly decreased, remaining a key concern for the Federal Reserve due to its impact on overall inflation targets.

💡Labor Market

The labor market refers to the collection of all laborers, job seekers, and employers engaged in the process of supplying and demanding labor. The video discusses contrasting views on the strength of the labor market, with official reports suggesting a strong market, while personal anecdotes and observations hint at a weakening job market with friends facing layoffs and prolonged job searches.

💡Wage Inflation

Wage inflation occurs when there are rapid increases in wages, which can lead to higher costs for businesses and contribute to overall inflation. The video connects wage inflation to services inflation, as the Federal Reserve aims to keep wage growth in check to meet its inflation targets.

💡Market Expectations

Market expectations refer to the beliefs and predictions of investors and economic agents about future economic conditions, such as interest rate changes. The video mentions how the release of the CPI report slightly increased optimism for a potential interest rate cut in July, demonstrating how economic data can influence market sentiment.

Highlights

Today's CPI inflation report is crucial for Federal Reserve's decision on interest rate cuts in June.

The report did not show a 'miracle' result needed for a June rate cut, leading to decreased odds of 3.1%.

Headline inflation is at 3.4%, slightly better than the previous 3.5%, but still not indicative of a significant change.

Core inflation, which excludes food and energy, improved from 3.8% to 3.6%, but remains well above the 2% target.

The slow progress in core inflation indicates it will take longer than 2 years to reach the 2% target.

The speaker rates the CPI report as a three out of five, acknowledging it's not terrible but not great.

Energy prices have seen a year-over-year increase of 2.6%, indicating a significant rise from negative rates earlier in the year.

Food prices are reported up by 2.2% year-over-year, but the speaker questions the accuracy due to changes in calculation methods.

Shelter inflation has decreased from 5.7% to 5.5%, but this figure is not reflective of true market prices due to averaging effects.

Services inflation, tied to wage inflation, has only slightly decreased from 5.4% to 5.3%, which is still concerning to the Federal Reserve.

The labor market is reported as strong, but the speaker's personal observations and anecdotes suggest otherwise.

The market is slightly more optimistic about a July rate cut, with odds increasing from 26% to 29% after the report.

There is a 70% chance predicted for the Federal Reserve to cut interest rates by the September meeting.

The speaker advises not to take the September odds too seriously due to the unpredictability at such a long lead time.

The Federal Reserve is unlikely to cut interest rates in June, despite a slight cooling in the rate of inflation.

The speaker encourages viewers to watch their previous video on inflation and interest rate cuts for further insights.

The speaker maintains a cautiously optimistic outlook but emphasizes that the current report is not sufficient for a June rate cut.

Transcripts

today's a very important day because the

newest CPI inflation report was released

this morning and if you want the Federal

Reserve to start cutting interest rates

in June then this report had to come in

phenomenal so basically a miracle was

needed right today that miracle was not

given so basically the Federal Reserve

is not going to cut interest rates in

June so the odds of that happening have

fallen to 3.1% it was at 3.3% yesterday

so this is coming from the CME fed watch

tool so I want to give you a summary

here's what happens this CPI inflation

report shows that headline inflation is

at

3.4% so that is better than the previous

3.5% but listen I want you to be aware

of this we're at 3.4% now but we were at

3.1% in January so at best you could say

that we're just spinning our Wheels here

or inflation may still be re

accelerating and it just took a pause

for this

month regardless this is not going to

give the Federal Reserve the confidence

that they were looking for to start

cutting interest rates in June and

that's why you see the odds where

they're at they're close to 0% so it's

just not going to happen not in

June now I want to give you the full

picture so the Federal Reserve likes to

use core inflation so this strips out

food and energy inflation so I want you

to check this out core inflation has

improved from 3.8% the prior month to

3.6% so that's

good however I mean if you think about

it that's still way above their 2%

Target and another thing is that I see

this as very slow progress because it's

taken 8 months for core inflation to

Fall by half a

percent so at this pace it's going to

take longer than 2 years to get

inflation down to their 2% Target so

listen I'm going to tell you this I'm

going to be very sincere with you about

this so this report just came out this

morning so I don't know how the media is

going to spin this I don't know what

they're going to say about this

report I would say that my honest

opinion about this report is it's not

terrible but then again it's definitely

not a great report it's somewhere in

between like if I had to give this a

review out of five stars I would give

this report a three out of five star

review so like an honest question to you

is like how do you feel when you see a

three star review like you're not you're

not impressed that's for sure but then

again you don't run away in horror so

that's how I feel about this report so

three out of five stars and let me tell

you why so let me tell you the four most

important things that you need to know

about this reports Energy prices food

prices shelter and services

inflation energy inflation has gotten

worse Energy prices are up 2.6%

year-over-year so this is accelerated

from the previous 2.1% last month so

listen 2.6% year-over-year increase that

may not sound that bad but it is so I'll

tell you why because in February Energy

prices were down by

1.9% in January Energy prices were down

by 4.6% so this year it's gone from

negative 4.6% to positive 2.6% so that's

a 7.2% increase just this year in 2024

so it's a bad start now let's talk about

food prices and bear with me on this one

because I have something to say about

this one so this report says that food

prices are up by 2.2% year-over-year so

it was at 2.2% last month it was at 2.2%

the month before that so it's just stuck

here so listen if food prices were going

up by 2.2% a year then that wouldn't be

so bad because honestly that's that

would be very close to their 2%

targets but are food prices really going

up by just 2.2% like that's questionable

that's my opinion and I'm not saying

this to go conspiracy theory on you so

let me

explain the government changes the way

that they calculates inflation in these

reports so that is not a conspiracy

theory that is an undeniable fact it

even it even says that in the report

just look up discontinued items and it

happens all the time if you want an

example they just Chang the calculation

in this report cans of ground coffee is

no longer in the

calculation so I would say that that's

very convenient for them when the price

of coffee beans has gone up so much so

they can throw it back into the

calculation when the price of coffee

beans comes down if you want the series

id look it up at 71731 too so I love how

they just change the calculation method

whenever they feel like it anyways

they're saying the report is saying that

food inflation is at

2.2% but just to remind you this means

that prices are still going up it's not

like prices are coming down Okay so

let's move on to shelter

inflation as expected based on how they

compute it it's come down to exactly

where we thought it would be it's fallen

from 5.7% to 5.5 %. so listen I'm going

to tell this to you again just in case

you missed it last report shelter

inflation does not reflect true market

prices that's because it takes into

account old leases so what I'm saying is

that it's not reflective of Market rates

okay so they do this to smooth it out so

that inflation in the report doesn't

show a big spike but on the flip side it

doesn't come down as quickly it's a

smoothing effect so basic basically we

know what's going to happen with this

one it's going to continue its slow

descent but I'm not saying that I'm not

saying that the situation with shelter

inflation is good even by their screwed

up measure of you know reporting it it's

way above Target it's at 5.5% that's not

even close to 2% so I want to tell you

this in my opinion shelter shelter

inflation is just a disaster right now

so home affordability is at record lows

I'm talking about both for renting and

buying a home and you know what's really

screwed up is that for people that are

renting rents are so high that they

can't save enough money to put a down

payments on these outrageously inflated

home

prices so I covered the housing market

once a month please check those

out let's move on to Services inflation

and this is still the biggest problem

according to the Federal Reserve because

we're dealing with wage

inflation so the Federal Reserve does

not want people to get big pay raises

higher than 2% otherwise that's going to

be higher than their target that's going

to mess up their

stats Services inflation has fallen from

5.4% to

5.3% so it sounds good but not really

because it's at 5.2% in

February so the Federal Reserve doesn't

like this because we're bouncing in this

5% range and again that's way above

Target way above 2% okay so the

government is reporting a strong labor

market so I'm sure that you've seen the

headlines I mean who

hasn't however the last jobs report

shows that the situation is weakening

they said 315,000 jobs added in March in

April it came in at

175,000 so there was a big slowdown and

the unemployment rates ticked up to

3.9% now I want to tell you this but

here's my disclaimer so I understand

that when I'm about to tell you it's not

scientific I understand that it's based

on a small sample size but this is just

what I'm seeing with my own eyes

so I have a bunch of friends that don't

have jobs they got laid off you know

surprisingly in this you know strong

economy right so they've been trying to

find a job for months you know some of

them have been looking for longer than a

year so they're telling me that the

labor market it's not as strong it's not

as robust as these government reports

are saying as they suggest so I don't

know what your experiences I don't know

what you're seeing I just find it

strange when one friend tells me this

and another one and another another one

and another one you know it it just

makes you think anyways that's the labor

market that's wage inflation and that's

how it's tied in with Services inflation

and the CPI

reports okay now let's look towards the

future after today's inflation report

the market became slightly more

optimistic that the Federal Reserve will

cut interest rates in

July so maybe it's because the rate of

inflation is cooled down slightly you

know it's not great but it's still a

step in the right

Direction so there's about a 29% chance

that the Federal Reserve Cuts interest

rates in July before the inflation

report it was at

26% so this report has given a little

bit more hope for July but the odds are

still heavily in favor that they do not

cut interest rates in July the next

meeting after July is held in September

so here are the odds a 70% chance that

they start cutting interest rates by

then honestly I wouldn't take these odds

too seriously because this meeting is

just too far away to predict accurately

so that's just my honest take on it so

I've given you my honest feedback and

interpretation of this report three out

of five stars so to summarize it could

have been worse right I mean I'm just

trying to maintain positivity here be

optimistic but that's not going to be

good enough to give the Federal Reserve

the confidence that they need to start

cutting interest rates in June that's a

sure thing so let me know what you think

about the situation if if you haven't

checked out my video about inflation and

interest rate Cuts I gave my prediction

on what's going to happen please check

that out I made it about 2 days ago

because some people are saying that the

Federal Reserve will not cut interest

rates for many years I disagree Please

Subscribe I thank you for the support I

wish you a very nice day take care