11 Jan 2024

Headline CPI Hotter Than Expected In December, Food Costs Hit Record High

>>> Headline Consumer Price Inflation printed hotter than expected in December, +0.3% MoM vs +0.2% exp and +0.1% prior, pushing the YoY headline CPI up to +3.4% (from +3.1% prior and hotter than the +3.2% exp)... >>> US Core CPI (ex-Food/Energy) rose 0.3% MoM as expected, dropping the YoY change below 4.00% (3.93%) for the first time since May 2021. This was also above estimates of 3.8% yoy. >>> Goods deflation has stalled as the used cars and trucks index rose 0.5 percent over the month, after rising 1.6 percent in November. Food costs stand at record highs. Fuel costs are on the rise again. >>> More problematically for The Fed is the fact that Core CPI Services Ex-Shelter (SuperCore) rose 0.4% MoM, upticking the YoY rise to +4.09%...(see chart below). All the subsectors of SuperCore rose MoM with the shelter index increased 6.2 percent over the last year, accounting for over two thirds of the total increase in the all items less food and energy index. >>> Market reaction: 10Y hit 4.06% and sp500 futures are sligthly down. Prediction markets are severely discounting a March rate cut. We started 2024 with a 70%+ chance that interest rate cuts begin by March. After the strong jobs report and a hot inflation reading, odds have nearly HALVED. Still, markets are pricing in 6 rate cuts in 2024, DOUBLE what the Fed is guiding. Source: Bloomberg, The Kobeissi Letter, www.zerohedge.com

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