INFLATION--FED's cutting rates again...

[Monahorns]

I wouldn't say hero at this point. But I saw a graph yesterday showing rate hike curves for last 50 years. This one which Powell is leading has a much higher slope than even Volker in the 80s. Hat tip to him.

 

[Chop]

Powell has done well once he got started, he just got started too late.

Energy remains the wildcard.

 

[Chop]

Looks like somebody is not happy at all with the Fed's rate hikes:

"The big picture: Sanders said he also believes the Federal Reserve's interest rates increases have hurt the economy and have not helped curb soaring inflation.

• "I think they're hurting the situation," Sanders said of the Fed's actions. "I think it is wrong to be saying that the way we're going to deal with inflation is by lowering wages and increasing unemployment. That is not what we should be doing."
• "Inflation right now is an international problem. In Germany, it is 10%. U.K. it is 10%. Canada it is 10%. Inflation, globally, is caused by the pandemic and the break in supply chains. It is caused by, in my view, the war in Ukraine, obviously," he said.
• "And it is also caused by incredible corporate greed. And I hope everybody understands that when you go to the gas tank — you fill up your car today — the oil companies are making huge profits, the food companies are making huge profits," he added. "We have to deal with that issue.""

 

[Monahorns]

Historical perspective on the rise and fall of inflation. It probably will take a quite a while to get back to "normal".

History Shows High Inflation Can Last Over Ten Years | Jon Wolfenbarger

 

[Sangre Naranjada]

Looks like somebody is not happy at all with the Fed's rate hikes:

"The big picture: Sanders said he also believes the Federal Reserve's interest rates increases have hurt the economy and have not helped curb soaring inflation.

• "I think they're hurting the situation," Sanders said of the Fed's actions. "I think it is wrong to be saying that the way we're going to deal with inflation is by lowering wages and increasing unemployment. That is not what we should be doing."
• "Inflation right now is an international problem. In Germany, it is 10%. U.K. it is 10%. Canada it is 10%. Inflation, globally, is caused by the pandemic and the break in supply chains. It is caused by, in my view, the war in Ukraine, obviously," he said.
• "And it is also caused by incredible corporate greed. And I hope everybody understands that when you go to the gas tank — you fill up your car today — the oil companies are making huge profits, the food companies are making huge profits," he added. "We have to deal with that issue.""

The ******* government makes more profit off a gallon of gas than oil companies do.

 

[bystander]

Looks like somebody is not happy at all with the Fed's rate hikes:

"The big picture: Sanders said he also believes the Federal Reserve's interest rates increases have hurt the economy and have not helped curb soaring inflation.

• "I think they're hurting the situation," Sanders said of the Fed's actions. "I think it is wrong to be saying that the way we're going to deal with inflation is by lowering wages and increasing unemployment. That is not what we should be doing."
• "Inflation right now is an international problem. In Germany, it is 10%. U.K. it is 10%. Canada it is 10%. Inflation, globally, is caused by the pandemic and the break in supply chains. It is caused by, in my view, the war in Ukraine, obviously," he said.
• "And it is also caused by incredible corporate greed. And I hope everybody understands that when you go to the gas tank — you fill up your car today — the oil companies are making huge profits, the food companies are making huge profits," he added. "We have to deal with that issue.""

He doesn't like it because he knows we can't justify higher minimum wage, reparations, benefits for illegal aliens and an expansion of the welfare state in general.

 

[mchammer]

Core inflation now 4.7% (expected 4.6%) and future inflation predicted to come down fast. All sub components have either peaked or have turned over (going down). Headline inflation is now 5.5% YoY. Again by Feb, the Fed rate will be higher than inflation. Game over.

Fed's Favorite Inflation Indicator Hotter Than Expected In November | ZeroHedge

 

[mchammer]

Nat gas under $5 per mmbtu.

Freeport LNG Announces Another Delay, Sending US NatGas Prices Lower | ZeroHedge

 

[Chop]

We’re still at around 7.1%.
Not going up and up anymore,
Decreasing a bit month by month since June 2022.
But not going down by much.
Not too terrible.
But still too high, and not at all good.
The battle continues.
Look for more 0.5% hikes by the Fed.
It may not be over for quite a while.

 

[Chop]

Cue politicians to prepare the public to get used to “the new normal.”

 

[Chop]

A real potential for a recession is looming.
Most likely not a long or deep one.

 

[mchammer]

We’re still at around 7.1%.
Not going up and up anymore,
But not going down by much.
Not too terrible.
But still too high, and not at all good.
The battle continues.
Look for more 0.5% hikes by the Fed.
It may not be over for quite a while.

This is year over year. In the last 3 months, inflation has been 4+% on an annualized basis. The YoY is going to drop sharply in the next 6 months due to favorable comps from Dec 2021 - May 2022.

 

[Chop]

This is year over year. In the last 3 months, inflation has been 4+% annualized. The YoY is going to drop sharply in the next 6 months due to favorable comps from Dec 2021 - May 2022.

It peaked in June.

 

[Chop]

Fed will most likely keep raising rates by 0.5%.

Then maybe lower rate increases will follow.

Any energy market disruptions could throw a wrench in the wheels.

 

[mchammer]

It peaked in June.

I am not aware of any item going up in price. Actually I am seeing deflation: crude oil, Nat gas, gasoline, chemical prices, housing, meat prices, lumber, etc.

 

[mchammer]

Core inflation now 4.7% (expected 4.6%) and future inflation predicted to come down fast. All sub components have either peaked or have turned over (going down). Headline inflation is now 5.5% YoY. Again by Feb, the Fed rate will be higher than inflation. Game over.

Fed's Favorite Inflation Indicator Hotter Than Expected In November | ZeroHedge

Meat prices have fallen substantially. Prime ribeye is $14 at Costco and beef tenderloin is $23/lb. Lamb chops were $8 per lb.

 

[mchammer]

Fed will most likely keep raising rates by 0.5%.

Then maybe lower rate increases will follow.

Any energy market disruptions could throw a wrench in the wheels.

Most are predicting 0.25% rates. At most 0.5% at next meeting and then 0.25% or none thereafter.

 

[mchammer]

Fed will most likely keep raising rates by 0.5%.

Then maybe lower rate increases will follow.

Any energy market disruptions could throw a wrench in the wheels.

According to this, either 3x0.25% or 0.5+0.25% for all of 2023:

The Fed's key benchmark borrowing rate is projected to rise another three-quarters of a percentage point in 2023, hitting a 17-year high of 5-5.25 percent from its current 4.25-4.5 percent level, according to the Fed's median projection from December.

 

[Chop]

Meat prices have fallen substantially. Prime ribeye is $14 at Costco and beef tenderloin is $23/lb. Lamb chops were $8 per lb.

Yeah, but how much is the mint jelly to go with the lamb chops?

 

[Chop]

According to this, either 3x0.25% or 0.5+0.25% for all of 2023.

The Fed's key benchmark borrowing rate is projected to rise another three-quarters of a percentage point in 2023, hitting a 17-year high of 5-5.25 percent from its current 4.25-4.5 percent level, according to the Fed's median projection from December.

Of course it’s possible that will be enough to lick inflation, but it may very well take more.

 

[mchammer]

Of course it’s possible that will be enough to lick inflation, but it may very well take more.

Once the fed rate is above the inflation rate, there is nothing more to do. At that point, your money in the bank is making real money for you over inflation.

 

[Chop]

Once the fed rate is above the inflation rate, there is nothing more to do. At that point, your money in the bank is making real money for you over inflation.

It sure is. But we don’t know if the 0.25% rate increases you mentioned will cause that cross-over. Or when such cross-over might happen.

 

[mchammer]

It sure is. But we don’t know if the 0.25% rate increases you mentioned will cause that cross-over. Or when such cross-over might happen.

The crossover is expected to occur in February. The issue is inflation in Fall, 2023. Will it be 2-3% or 3-4%?

 

[Chop]

The crossover is expected to occur in February. The issue is inflation in Fall, 2023. Will it be 2-3% or 3-4%?

That would be nice, and I hope it happens on that sort of timetable, but I’m not counting my chickens just yet…

 

[mchammer]

That would be nice, and I hope it happens on that sort of timetable, but I’m not counting my chickens just yet…

If you look at inflation since Oct 2021, you will note inflation jumped sharply between Dec 2021 and May, 2022. The YoY crossover is baked in.

 

[mchammer]

The crossover is expected to occur in February. The issue is inflation in Fall, 2023. Will it be 2-3% or 3-4%?

The issue is if the tail inflation is above 3%, which means a delay in the Fed cutting rates in 2024. It’s not about hiking any more (beyond the next 0.5-0.75% increase in 2023).

 

[Mr. Deez]

The inflation problem will go away when the Fed decides to make it go away. Remember, it is a choice.

 

[Monahorns]

It is also the Federal government's choice. The spending bills they sign are just as responsible.

 

[Mr. Deez]

It is also the Federal government's choice. The spending bills they sign are just as responsible.

Well, they go together. One of the reasons the Fed has been allowing for inflation is to account for the ridiculous spending bills. They have to monetize all the debt be government has been racking up for the last several years.

 

[mchammer]

That would be nice, and I hope it happens on that sort of timetable, but I’m not counting my chickens just yet…

4th months now of housing DEFLATION. Yet, on a YoY basis, house prices are up 8%. It’s all about the comps. Food and housing inflation are now gone. Only thing left is labor inflation and that will moderate soon. Labor inflation is why there will likely be an inflation tail into late 2023 of 3-4% assuming no significant recession.

US Home Prices Tumbled For 4th Straight Month In October | ZeroHedge