August CPI report was out this morning. Headline CPI MoM rose 0.1% in August vs. 0.2% in July, -0.1% in June, 0% in May and 0.3% in April while the core CPI MoM rose 0.3% in August vs. 0.2% in July, 0.1% in June, 0.2% in May and 0.3% in April. Headline CPI YoY rose 2.5% in August vs. 2.9% in July, 3% in June, 3.3% in May, 3.4% in April, 3.5% in March, 3.2% in February, 3.1% in January, 3.4% in December, 3.1% in November, 3.2% in October, 3.7% in September, 3.7% in August 2023. Core CPI YoY rose 3.2% in August vs. 3.2% in July, 3.3% in June, 3.4% in May vs. 3.6% in April, 3.8% in March, 3.8% in February, 3.9% in January, 3.9% in December, 4% in November, 4% in October, 4.1% in September, 4.2% in August 2023. The report also mentioned a sharp price increase of motor vehicle insurance, which went up 16.5% YoY.
August’s 2.5% increase is the smallest 12-month increase since February 2021 after July’s 12-month increase of 2.9%, which is the first time the YoY headline CPI went below 3% since April 2021. It does appear that the inflation is cooling down so chances are the Fed will start the rate cut after the FOMC meeting next week. I still think they will just cut 25 bps in the next meeting as we are so close to the election. If they cut more than 25bps, it will send a very concerning signal to the world and be perceived as overly political.
Sorry for the lack of updates in the past month. I am dealing with somehealth issues. It’s not serious but was very uncomfortable for a while. I am adjusting my lifestyle to minimize the chance of getting it again. Regardless, next week the Fed will raise rates and The Great Reset Diary will conclude after 2+ years. I will probably update even more scarcely except for some post-mortems. I believe we will see more wild events when the rates start falling. When rates are at 5+%, a lot of money flows into the US dollars and the demand for US treasury debt is high. But we are probably going to see the reverse flow once the rates dip significantly. We will know more details about the Fed’s plan going forward but I suspect things will actually get more complicated once the rate cut cycle starts.
