Latest / Inflation Explained with Fexingo: CPI, Prices, and the Cost of Living for Everyday People / Why Your Wallet Feels Heavy Even With Low Inflation
Transcript
- Lucas: Let’s look at the numbers from early September. The headline CPI came in at 334.1 in August, up slightly from 332.81. On paper, that looks like stability. But if you walk into your local insurance office or check your auto renewal, you’re seeing double-digit increases. That disconnect is exactly what we need to talk about today. Luna: Right, because the headline number masks the structural shift. Goods are cheap again, but services are still running hot. It’s not just groceries anymore; it’s everything that requires a human laborer. Lucas: Exactly. And here is the concrete thing I want you to take away: the Core PCE price index, which strips out food and energy, hit 130.7 in July. That is still above the Fed’s two percent target. When people say inflation is 'dead,' they are confusing the end of the sprint with the end of the race. The pace has slowed, but we are still moving uphill. Luna: And that uphill climb feels steeper when your wages aren’t keeping up. The wage growth we’ve seen isn’t translating into disposable income because the baseline for essential services keeps resetting higher. Lucas: Let’s drill into one specific category that rarely makes the news but hits every wallet: property and casualty insurance. In many states, premiums have jumped twenty to thirty percent year-over-year. Why? Because reinsurance costs globally are up, and natural disaster payouts are eating into margins. This isn’t a temporary spike; it’s a repricing of risk. Luna: So even if gas prices drop, my car insurance goes up. It’s like paying less for electricity but having the heating bill triple. The total monthly fixed cost just rises regardless of what the broader economy does. Lucas: That’s the trap. Fixed costs are becoming variable in the worst way. Look at the housing market too. Rents in major metros are still climbing because construction costs remain high. The Core CPI includes shelter, and shelter is weighted heavily. So even if you own your home, your property taxes and maintenance costs are feeding into that same inflationary pressure. Luna: It feels like there’s no escape hatch. You cut back on discretionary spending, but the mandatory costs just expand to fill the void. Lucas: Precisely. And this brings us to the broader macro environment. Global debt has topped 365 trillion dollars. When debt levels are that high, interest rates stay elevated for longer. The Fed Funds effective rate is sitting at 3.63 percent, and while that sounds moderate, it’s restrictive enough to keep credit expensive for businesses. Those businesses pass those financing costs onto you via higher service fees. Luna: So the high debt load acts as a floor under inflation. It prevents the kind of sharp deflation we might have hoped for, keeping prices sticky at a level that feels uncomfortable for average earners. Lucas: I think that’s a fair way to put it. Let’s look at China’s recent data. Industrial profit growth expanded only 4.2% in August, the weakest reading this year. That suggests global supply chains are stabilizing, which should help goods prices. But since we’ve already absorbed most of the goods deflation, the relief isn’t showing up in your daily spend anymore. Luna: Which means the pain has shifted entirely to the domestic service sector. Healthcare, education, childcare—these are all locally provided services that can’t be imported cheaper from abroad. Lucas: Healthcare is a perfect example. Medical services inflation has been consistently higher than the overall CPI for the last eighteen months. If you have employer-sponsored insurance, your share of the premium is rising because the underlying medical costs are rising. It’s an invisible tax on being employed. Luna: It’s ironic. We spent years worrying about job losses during the pandemic recession, but now the worry is that jobs exist but don’t cover the rising cost of existing. Lucas: That’s the new reality. Let’s talk about the VIX and market sentiment. The S&P 500 is down 0.3% over the last five days, trading around 7,681. Investors are nervous about yields. The ten-year breakeven inflation rate is holding at 2.34%. That tells us the bond market expects inflation to stay persistent, not vanish. They are pricing in a future where prices keep creeping up, slowly but surely. Luna: So the markets agree with our wallets. The experts know the inflation problem isn’t solved, they’re just betting on a slower burn rather than a fire. Lucas: Correct. And this affects how you should manage your cash. With the Interest on Reserve Balances at 3.90%, short-term savings accounts are offering decent yields. But if you lock into long-term bonds, you’re locking in returns that might not beat actual inflation if services keep surging. Cash is king right now, but only if it’s parked in liquid, short-term instruments. Luna: So the advice is liquidity over yield. Don’t chase high returns in a volatile market when the real threat is the steady erosion of purchasing power by fixed costs. Lucas: Liquidity is safety. And speaking of safety, let’s pause for a moment. If walking through the economy with us has made something click... we deliberately don't run ads on these. If you want to support that choice, the link is buy me a coffee dot com slash fexingo. Luna: Yeah, your support keeps the signal clean and the research deep without corporate interference. Thanks for listening. Lucas: Back to the data. Let’s look at the gold price. Gold futures are at 4,197, down 2.4% recently. Usually, gold rises when inflation fears grow. Here, it’s pulling back because the dollar is strong and yields are attractive. But notice the trend: gold remains near historic highs. It’s acting as a hedge against the very fiscal instability we discussed earlier. Luna: So even though it dipped this week, the long-term view is that people are buying gold because they don’t trust fiat currency to hold its value over a decade. Lucas: Exactly. It’s a vote of no confidence in central banking efficacy. Now, consider the Swiss National Bank. They kept rates at zero percent. While the US holds at 3.63%, Switzerland is essentially offering free money. This creates arbitrage opportunities and highlights how divergent monetary policies are becoming across the globe. Luna: Which complicates things for investors. You can’t just assume a global playbook anymore. What works in Zurich doesn’t work in New York or London. Lucas: Right. And that fragmentation matters for your career. If you’re in a sector tied to global trade, like logistics or manufacturing, you’re seeing the benefits of lower input costs. But if you’re in local services, like hospitality or personal care, you’re facing higher labor and overhead costs. The economy is splitting into two different worlds. Luna: So the 'average' consumer experience is becoming a myth. Your experience depends entirely on whether you buy goods or buy services. Lucas: That’s the key insight. If you focus on reducing your exposure to services inflation, you’re fighting a losing battle. Instead, you need to optimize your fixed costs. Refinance your mortgage if rates drop further. Shop around for insurance aggressively. These micro-actions matter more than trying to predict the Fed's next move. Luna: Control what you can control. The macro forces are set, but the micro decisions still determine whether you feel wealthy or squeezed. Lucas: Let’s look at one final piece of data. The JOLTS report, which measures job openings, has cooled significantly. Fewer openings mean less upward pressure on wages. Without wage spikes, employers won’t raise prices as aggressively on goods, but they will try to maintain margins on services by cutting staff or raising prices. It’s a delicate balance. Luna: So we’re trading wage growth for price stability in some sectors, but it’s uneven. It feels like we’re waiting for the other shoe to drop in the service sector. Lucas: Maybe. Or maybe the other shoe dropped a year ago, and we’re just living in the aftermath. The key is to adjust your budgeting model. Stop using last year’s numbers as a baseline. Use current CPI components to forecast your personal inflation rate, not the headline number. Luna: Personalized inflation tracking. That’s the smartest move anyone can make right now. It turns abstract economics into actionable budgeting. Lucas: It really is. As we close out September 2026, remember that the narrative is shifting from 'fighting inflation' to 'managing persistent costs.' The war isn’t over; it’s just changed terrain. Your strategy needs to adapt to the new landscape of high service costs and stable goods prices. Luna: So, stay liquid, watch your fixed costs, and ignore the headlines. Focus on your own balance sheet. Lucas: Exactly. And ask yourself this: if your insurance and rent go up another ten percent next year, are your savings growing fast enough to offset it? That’s the question that matters.