Latest / Markets with Megan: A Quick Financial Markets Update / Fed's Response to Unexpected Inflation Rise | S2 E011 | 02-12-2025

Transcript

Fed's Response to Unexpected Inflation Rise | S2 E011 | 02-12-2025 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Speaker 1: Well, that happened even faster than we had anticipated.
• 0:03
  Speaker 1: We're talking about inflation today.
• 0:05
  Speaker 1: It's Wednesday, February the 12th.
• 0:07
  Speaker 1: Be sure to subscribe, like or hit the alarm bell for this podcast, and you can also visit our webpage at marketswithmeganfm.
• 0:16
  Speaker 1: Let's dig into that inflation data that we got today and why the markets are off today.
• 0:19
  Speaker 1: First of all, the inflation data for the month of January came in a bit hotter than expected.
• 0:25
  Speaker 1: Core inflation, which is what's most important to the Federal Reserve, excludes both food and energy, and energy prices contributed to an increase in the headline reading.
• 0:36
  Speaker 1: But when you strip those things out and try and take out the volatile items, it rose four-tenths of a percent in January.
• 0:42
  Speaker 1: Doesn't sound like a lot, but that's actually a pretty big move for inflation On a year-over-year basis.
• 0:47
  Speaker 1: Inflation was supposed to come in at the core level at 3.1%.
• 0:51
  Speaker 1: It came in actually at 3.3%, so it moved higher over the prior month and actually was higher than anticipated.
• 0:59
  Speaker 1: So this was not something that the markets wanted to see, nor the Federal Reserve.
• 1:03
  Speaker 1: But let's talk about where this is concentrated.
• 1:05
  Speaker 1: First of all, food is a problem.
• 1:07
  Speaker 1: We know that.
• 1:08
  Speaker 1: I think most people have heard or experienced the increase that we've seen in egg prices, which were up 15% just in January alone.
• 1:15
  Speaker 1: So it's not just food, it's also shelter costs.
• 1:19
  Speaker 1: These things continue to rise, and this is a big portion of this index on how it's calculated.
• 1:24
  Speaker 1: So shelter costs are rising, and we also saw things like used cars and airfare rising for the month.
• 1:30
  Speaker 1: This all kind of overshadowed the declines we saw in some things like apparel.
• 1:35
  Speaker 1: But one of the other areas that we've looked at on the service side of things that I think hits home for so many Americans, and that's when you look at things like motor vehicle insurance.
• 1:45
  Speaker 1: You know motor vehicle insurance continues to be a problem for consumers.
• 1:50
  Speaker 1: It's up more than a double digit pace on an annual basis and rose again in January.
• 1:54
  Speaker 1: So this is a problem.
• 1:55
  Speaker 1: These are things the Fed can't control.
• 1:57
  Speaker 1: We think what this is doing with this read today again, it's one month.
• 2:01
  Speaker 1: We often say let's see this further of a trend.
• 2:04
  Speaker 1: We have been talking, though, about how there's underlying components of inflation that continue to show us some warning signs, and we're seeing it now in these readings.
• 2:12
  Speaker 1: There still are a couple more inflation reports.
• 2:14
  Speaker 1: We'll get that.
• 2:14
  Speaker 1: We can come back to you with on those reports as well, but for the March meeting, the Fed won't be cutting interest rates.
• 2:21
  Speaker 1: We think that that's off the table.
• 2:23
  Speaker 1: We actually think that the first interest rate cut if they can do it, if this inflation turns around won't be till the second half of the year at the earliest.
• 2:31
  Speaker 1: So this is obviously why the markets are looking at this.
• 2:33
  Speaker 1: They're pricing out some of the Fed rate cuts higher for longer, especially long-term treasuries.
• 2:39
  Speaker 1: We've seen those yields move higher.
• 2:41
  Speaker 1: Unfortunately, that's not going to do much good for the housing market as well.
• 2:44
  Speaker 1: That's all we have today.
• 2:46
  Speaker 1: We'll be back with some more of the inflation data and some more economic indicators that are impacting the markets.
• 2:51
  Speaker 1: Thank you.