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“Time would become meaningless if there were too much of it.” – Ray Kurzweil

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Equity futures are mixed heading into the open and the January CPI report but based on Powell’s testimony in front of the US Senate yesterday, this report will probably have no impact on short-term Fed policy which looks to be on hold.  A key reason for that view from the Fed is that while inflation has come down considerably from its peak, it’s become stuck at levels too high for the Fed’s liking. Hence, the moderately restrictive policy stance.

The chart of Core CPI encapsulates this pattern. After peaking at a year/year rate of 6.6% in September 2022, Core CPI steadily pulled back over the next 20 months dropping to a rate of 3.2% last July. Since July, though, the core inflation rate has been stuck at that 3.2% level. The year/year rate was forecast to fall to 3.1% in this morning’s report for January which would have been the lowest rate since April 2021. The actual rate came in higher than expected at 3.3% which is still within the stall speed range we’ve been in since last July. Even if the y/y rate did fall to 3.1%, though, the core rate would still be 0.7 ppts above its pre-Covid peak of 2.4% from 2015 through 2020.