BREAKING NEWS: CPI Inflation Report Released! | Here's What You Need to Know
Summary
TLDRThe 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
📈 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%.
🏠 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.
🔮 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.
Mindmap
Keywords
💡CPI Inflation Report
💡Federal Reserve
💡Interest Rates
💡Core Inflation
💡Energy Prices
💡Food Prices
💡Shelter Inflation
💡Services Inflation
💡Labor Market
💡Wage Inflation
💡Market Expectations
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
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