Headline December CPI fell .1% while core was up .3% month-over-month and both were exactly as expected. 

Year-over-year headline inflation rose 6.5% and the core rate was higher by 5.7%, with both decelerating from the 7.1% and 6% seen in November, respectively. 

Headline and Core CPI Y-O-Y

Key Internal Figures 

• Powell’s new obsession is the ex food/energy/shelter figure and that fell .1% m/o/m for a 3rd month and up 4.4% y/o/y. 

• Energy prices fell 4.5% m/o/m, though still up 7.3% y/o/y. 

• Food prices grew by .3% m/o/m and a still robust 10.4% y/o/y. 

It’s quite funny that the Fed will now chisel the core rate to aid them in giving the appearance that their policy is meeting its goals. 

The Higher-Priced Reality for Consumers

• Rent of primary residence was higher also by .8% m/o/m and by 8.3% y/o/y. 

• Medical care prices rose .1% after two down 5 tenth prints 

• It also remains expensive to eat out, with ‘food away from home’ seeing a .4% increase in price m/o/m and 8.3% y/o/y. 

• Drinking, too, remains pricey. ‘Alcoholic beverages at home’ saw a .6% m/o/m price rise and 5.3% y/o/y. As for drinking away from home, prices rose .8% m/o/m and 6.8% y/o/y.

The fed funds futures market has fully taken out any chance the Fed hikes 50 bps in any of the following meetings. As you can see below, the Fed Feb. 1 FOMC meeting forecasts only a 9% chance for a 50 bp tightening

Living with higher rates for longer will become the new narrative as opposed to the Fed stopping with its hikes. That’s because higher rates are a continued source of tightening with all the debt that will have to be refinanced, forcing higher costs on borrowers. Plus, we will still have to deal with QT.

I’m going live at 1 p.m. ET today EXCLUSIVELY for my Power Income Trader members for a live look at the markets and what to expect in the days ahead.

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