Latest / Markets with Megan: A Quick Financial Markets Update / Economic Pressures Mount as CPI Figures Surprise Experts | Episode 179 | 10-10-24

Transcript

Economic Pressures Mount as CPI Figures Surprise Experts | Episode 179 | 10-10-24 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: Well, this economic data we get keeps putting the Fed in a very difficult situation.
• 0:05
  Megan Horneman: That's all we can say about the report we got this morning on September's Consumer Price Index.
• 0:09
  Megan Horneman: It is Thursday, october the 10th, and this morning we received the inflation reading that we've been looking for for the month of September, and this is prices at the consumer level.
• 0:20
  Megan Horneman: Unfortunately, both of these whether you look at the headline level, which includes food, energy, or you strip out food and energy both of these levels came in higher than they were expected.
• 0:33
  Megan Horneman: At the headline level, it matched the past two months reading at 0.2%, and then, when you exclude food and energy, it's matched the last month, which is basically sitting at a five-month high On a year-over-year basis.
• 0:47
  Megan Horneman: The core reading the one the Fed's going to be looking at that actually is now rising 3.3% versus the expectation of 3.2%, so the progress that we've made in inflation looks to be stalling a bit.
• 1:00
  Megan Horneman: Let's dig into a couple more of the details, both of these at the headline level and the core level.
• 1:06
  Megan Horneman: If you just look at the index level, both are sitting at a record high.
• 1:10
  Megan Horneman: That's not surprising because inflation continues to grow, albeit at a slower pace.
• 1:16
  Megan Horneman: When you look in the different categories.
• 1:19
  Megan Horneman: Let's just take a look at what actually declined.
• 1:22
  Megan Horneman: It was gasoline.
• 1:23
  Megan Horneman: We saw a big drop in gasoline prices.
• 1:26
  Megan Horneman: When you look at services, though, services are back up, rising four-tenths on a month-over-month basis.
• 1:32
  Megan Horneman: So your year-over-year level there is 4.7%.
• 1:36
  Megan Horneman: This is not what the Fed wants to see.
• 1:38
  Megan Horneman: Some of the other areas that rose food, apparel, a lot of goods prices, furniture we saw this also.
• 1:46
  Megan Horneman: So we saw the first time that goods prices have increased now for two months since 2023.
• 1:53
  Megan Horneman: You also saw, on the service side, some of those things that are important, whether it's insurance.
• 1:58
  Megan Horneman: Prices went back up again on auto insurance, medical care, physician services.
• 2:03
  Megan Horneman: These are all rising and this is a problem for the Fed, because they've said service inflation is sticky, and we also got the reading on the real average hourly earnings and they're only rising 1.5%.
• 2:16
  Megan Horneman: So when you're looking at services, rising 4.7%, this is problematic and the Fed is going to be paying close attention to this.
• 2:26
  Megan Horneman: What we've seen is the equity markets don't like this.
• 2:28
  Megan Horneman: Obviously.
• 2:28
  Megan Horneman: Equity markets are down today and we're seeing yields on the long end of the curve rising.
• 2:35
  Megan Horneman: This is because we're now getting more concern over the fact that inflation is not completely done and behind us.
• 2:42
  Megan Horneman: The other thing is, when you look at the Fed funds futures market, it is now still pricing in a 25 basis point rate cut at the November meeting.
• 2:50
  Megan Horneman: But remember, even in the past couple of days there was some probability of a 50 basis point rate cut.
• 2:56
  Megan Horneman: That's likely off the table and you even had some Fed officials on the record today saying they wouldn't mind if the Fed pauses in November to see how things progress.
• 3:07
  Megan Horneman: We're going to wait and see.
• 3:08
  Megan Horneman: We got more inflation data tomorrow, so we'll be back with that.
• 3:11
  Megan Horneman: We'll get the inflation level at the producer prices and this is important as well because this gives us an idea of how companies can actually have the pricing power there what are they purchasing their goods for and we'll be back again.
• 3:25
  Megan Horneman: We said the Fed still has a couple more important inflation readings as well as another jobs report before that meeting.
• 3:33
  Megan Horneman: So we'll keep monitoring this data, but we will be back tomorrow with what we see on the producer level.
• 3:38
  Megan Horneman: That's all we have today.
• 3:39
  Megan Horneman: If you like this podcast, please subscribe, hit that alarm bell, share it with friends or colleagues and if you want any of our past podcasts, you can go to marketswithmegan fm.
• 3:49
  Megan Horneman: Thank you.