CPI preview: Inflation expected to have cooled further in May ahead of Fed decision

[mahatmakanejeeves]

It looks as if one of our Alexandras done got herself hitched.

CPI preview: Inflation expected to have cooled further in May ahead of Fed decision

Alexandra Canal·Senior Reporter
Mon, June 12, 2023 at 12:45 PM EDT

Inflation data set to be released by the Bureau of Labor Statistics on Tuesday will be a critical economic indicator ahead of the Federal Reserve's monetary policy decision later this week.

According to Bloomberg consensus estimates, May's Consumer Price Index (CPI) is expected to reveal headline inflation rose 0.2% over last month and 4.1% over the prior year, a slowdown from April's 0.4% month-over-month increase and 4.9% annual gain.

On a "core" basis, which strips out the more volatile costs of food and gas, prices in May are expected to have climbed 0.4% over the prior month and 5.2% over last year. ... A 4.1% jump in headline inflation would be the slowest annual increase since April 2021, but would still be significantly above the Federal Reserve's 2% target.

The Fed has been raising interest rates to try to bring down inflation, but the central bank risks sending the economy into a recession by hiking rates too high too fast. The Fed has signaled it could pause its hikes, saying it would continue to assess incoming data ahead of the June meeting.

{snip}

[multigraincracker]

1. Forget raising interest rates.

Put in an excess profit tax.

80% of inflation has gone to big business in profits.

[mahatmakanejeeves]

2. Price Increases Are Expected to Ease Again

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Updated
June 13, 2023, 8:07 a.m. ET 21 minutes ago

May Inflation Report

Price Increases Are Expected to Ease Again

The rate of inflation probably moderated last month, another sign of cooling as the Federal Reserve considers pausing interest rate increases.

Inflation is easing, but is it enough for the Fed?
Federal Reserve officials are expected to hold interest rates steady when they announce their June policy decision on Wednesday, but they face one more wild card before they make their choice: the Consumer Price Index report, set for release Tuesday at 8:30 a.m. Eastern.

The Fed is now 15 months and 10 consecutive rate increases into its fight against rapid inflation, a campaign that has pushed borrowing costs above 5 percent for the first time since 2007. Given how much it has already done to slow the economy, officials are increasingly in favor of taking a break to assess the results: Pausing could give policymakers more time to see if higher interest rates are cooling growth enough to put inflation on a pathway back toward a more normal 2 percent pace.

Tuesday’s inflation report, which covers May, will offer the latest evidence on how well the fight against inflation is working.

The annual inflation rate probably cooled last month, easing to 4.1 percent from 4.9 percent in April, according to economists surveyed by Bloomberg. That would leave the inflation rate at less than half of last summer’s 9 percent peak. And a closely watched “core” measure, which strips out volatile food and fuel prices to give a sense of underlying trends, is also expected to slow.

A notable deceleration could help central bankers feel more comfortable leaving rates unchanged this month.

But there is no guarantee inflation will come down as much as expected — it has defied economists’ forecasts many times over the past two years. And even if year-over-year inflation is pulling back, officials are also likely to watch the month-on-month pace of increase. Monthly core inflation is expected to remain at 0.4 percent, a pace that economists at JPMorgan called “uncomfortably high” in a note previewing the release.

A hot inflation reading could make the Fed’s decision more complicated, perhaps nudging it toward a more aggressive path. Investors already expect the central bank to restart rate increases in July, and are penciling in a small chance that Fed officials could raise rates this week.

Economists at Barclays wrote that while they are expecting the Fed to skip a rate move this week, “our conviction is limited.” A bigger-than-expected inflation number on Tuesday, they wrote, “would likely be sufficient to tip the balance to a hike, depending on the composition.”

The Fed shoots for 2 percent inflation over time, a goal it defines using a different measure, the Personal Consumption Expenditures index. Tuesday’s data will feed into P.C.E. inflation figures — set for release on June 30 — and offer a more timely snapshot of inflation trends, which is what makes the report so important.

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[progree]

3. Sadly, the CORE CPI (which is what the Fed most looks at) has been stuck for months

Last edited Tue Jun 13, 2023, 10:56 PM - Edit history (1)

though nowadays they look at things like "supercore service inflation" and core ex shelter and who knows what other series.

Edited to add: Same graph as above, but the CPI and the CORE CPI shown on separate graphs for less clutter and more clarity:



They don't give a rat's ass about yoy (12 month) CPI for projecting future inflation because (a) it has volatile energy and food prices that bounce up and down month-to-month (b) data several months ago is ancient data when assessing CURRENT or RECENT inflation.

LBN thread on CPI: https://www.democraticunderground.com/10143087481

Various series:

BLS CPI press release: https://www.bls.gov/news.release/cpi.nr0.htm
CPI: https://data.bls.gov/timeseries/CUSR0000SA0&output_view=pct_1mth
CORE CPI: http://data.bls.gov/timeseries/CUSR0000SA0L1E&output_view=pct_1mth

For all BLS timeseries data, one can see the index values and other periods like rolling 3 month, rolling 6 month, rolling 12 months by clicking "More Formatting Options" on the upper right and then on the page that shows up, check the various checkboxes

REAL AVERAGE HOURLY EARNINGS of production and non-supervisory workers https://data.bls.gov/timeseries/CES0500000032 ,
. . . private workers: https://data.bls.gov/timeseries/CES0500000013

CPI excluding shelter - https://data.bls.gov/timeseries/CUUR0000SA0L2
. . . FRED: https://fred.stlouisfed.org/series/CUUR0000SA0L2
. . . Table 3 has CPI ex shelter, as well as Core ex shelter https://www.bls.gov/news.release/cpi.t03.htm

Rent (SA) https://data.bls.gov/timeseries/CUSR0000SEHA
Fred: (SA) Rent of Primary Residence in U.S. City Average https://fred.stlouisfed.org/series/CUSR0000SEHA
(NSA) https://fred.stlouisfed.org/series/CUSR0000SEHA

SA = Seasonally Adjusted, NSA = Not Seasonally Adjusted