Latest / Markets with Megan: A Quick Financial Markets Update / CPI Surprise: Inflation Drops 0.4% | S3 E153 | 07-14-26

Transcript

CPI Surprise: Inflation Drops 0.4% | S3 E153 | 07-14-26 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: The Fed got some really good news today.
• 0:02
  Megan Horneman: It's Tuesday, July the 14th, and this is Markets with Megan.
• 0:06
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• 0:08
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• 0:22
  Megan Horneman: Well, this morning we relieved the June we received the June reading on consumer price index.
• 0:27
  Megan Horneman: So this is the inflation reading specifically at the consumer level.
• 0:31
  Megan Horneman: And this was a shocking report.
• 0:34
  Megan Horneman: We've had inflationary pressures for the past few months because of the turmoil in the Middle East, and we actually saw headline inflation decline for the first time in 2020.
• 0:45
  Megan Horneman: Now, most analysts had expected some weakness at the headline level because we had such a massive drop in commodity prices during the month, but a 0.4% decline on a month-over-month basis was surprising.
• 0:58
  Megan Horneman: At the headline level, though, inflation is still rising 3.5% on a year-over-year basis, but that is better than the 4.2% last year.
• 1:08
  Megan Horneman: As I mentioned, the headline level was all driven by the energy and commodities.
• 1:12
  Megan Horneman: Every single one of those energy commodity components declined.
• 1:16
  Megan Horneman: And when you look at energy services, and this is really it really hits households as well, that actually fell the most since 2023.
• 1:24
  Megan Horneman: So good news there from the commodity standpoint.
• 1:27
  Megan Horneman: At the core level, inflation was actually flat, and that was better than expected.
• 1:32
  Megan Horneman: It's actually rising now 2.6% on a year-over-year basis versus 2.9%.
• 1:38
  Megan Horneman: So still not at the Fed's target, but much better than it was anticipated.
• 1:43
  Megan Horneman: What's even better is when you look at the super core service which is the services index, excluding housing, that actually dropped.
• 1:51
  Megan Horneman: It actually declined.
• 1:52
  Megan Horneman: So that's good news for the Federal Reserve.
• 1:55
  Megan Horneman: The declines we saw were led by transportation, apparel, education, and communication.
• 2:01
  Megan Horneman: And then there was some modest upticks in food, airline fares, recreation, and that owner's equivalent rent component, but not as bad as we've seen in prior months.
• 2:12
  Megan Horneman: This is good news for the Federal Reserve.
• 2:15
  Megan Horneman: The new chairman is testifying to Congress today and tomorrow.
• 2:19
  Megan Horneman: This is part of their semi-annual testimony that they do.
• 2:22
  Megan Horneman: This morning, their pre-release statements continue to mention their hawkishness towards inflation.
• 2:29
  Megan Horneman: In fact, they mentioned that they have no tolerance on the elevated inflation.
• 2:33
  Megan Horneman: They'll do everything they can to create price stability and that they did mention that it'll be the past five years will be a thing of the past when they when they can tackle this.
• 2:42
  Megan Horneman: So I don't think this report obviously will make the Fed make any changes to monetary policy in the very near term.
• 2:49
  Megan Horneman: There was some expectations that they might raise rates as early as the August meeting.
• 2:53
  Megan Horneman: I think that's off the table for now.
• 2:56
  Megan Horneman: Tomorrow we'll get the product producer price index and we will come back and give you some details about that.
• 3:02
  Megan Horneman: That's the component inflation, um, the inflation component of all of the different goods and services that are produced.
• 3:10
  Megan Horneman: So that's important because that does sometimes have a leading impact on these consumer prices.
• 3:16
  Megan Horneman: The only other negative side, we're gonna take this report as good news for right now.
• 3:20
  Megan Horneman: It doesn't mean the Fed needs to raise rates, but we are looking at the turmoil intensifying again in the Middle East, and there's no real movement in that straight of Hormuz.
• 3:29
  Megan Horneman: So there's gonna be a lot of volatility in the coming months around inflation data.
• 3:34
  Megan Horneman: The markets like this report, um, yields on the treasury market across the curve all fell.
• 3:39
  Megan Horneman: As a result, we saw things like the S P 500 and the NASDAQ rebound.
• 3:43
  Megan Horneman: They like lower yields.
• 3:45
  Megan Horneman: We are seeing the Dow Jones relatively flat.
• 3:48
  Megan Horneman: And don't forget that we are in the midst of the kickoff this week of earnings season.
• 3:53
  Megan Horneman: So there's not much this week aside from the financials, but there is a lot in the next couple weeks that we can come back and give you some details about.
• 4:00
  Megan Horneman: That's all we have today.
• 4:02
  Megan Horneman: Again, we'll be back tomorrow with information about the producer price index.
• 4:05
  Megan Horneman: And if you want a history of our podcast, you go to marketswithmegan.fm.
• 4:09
  Megan Horneman: Thank you.