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U.S. Core CPI Improving
August 15, 2023
- The U.S. CPI was +0.2% m/m (3.2% y/y) and the core (ex food & energy) CPI was +0.2% m/m (4.7% y/y) in July … both about as expected.
- But the U.S. labor market does not appear to have rolled over enough to remove concerns about wage inflation yet, despite some small cracks appearing (eg, initial jobless claims up w/w to 248,000 this week). The tight employment situation still matters for trend CPI services inflation.
- Bottom line: while there is more data to come, the Fed can likely pause in September given the improving inflation trajectory in the past several months. Still, since inflation has historically come in multiple waves, it’s too early to consider Fed cuts at this stage. Based on history, a second wave of U.S. inflation starts on average 30 months after the first peak. We are “only” 13 months past the June 2022 peak in the CPI of 9% y/y, ie, too early to know with confidence that the inflation anchor is firm.
Source: Don Rissmiller, Strategas
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Jumbo Program Enhancements
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