Latest / Markets with Megan: A Quick Financial Markets Update / Markets Rally on CPI, Megan Isn't Sold | S3 E159 | 08-12-26

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Markets Rally on CPI, Megan Isn't Sold | S3 E159 | 08-12-26 · Markets with Megan: A Quick Financial Markets Update

• 0:01
  Megan Horneman: The markets are really cheering that inflation data that we got today.
• 0:04
  Megan Horneman: It is Wednesday, August the 12th, and this is Markets with Megan.
• 0:07
  Megan Horneman: If you like this podcast, you can subscribe, hit the alarm bell, share it with your friends, family, colleagues, anybody who's interested in those headline economic data reports that we get, what it means for the markets, and then also someone who can dig into those headlines and give you the true story of what's going on in the economy.
• 0:25
  Megan Horneman: So let's dig into what we got today.
• 0:26
  Megan Horneman: This was the consumer price index.
• 0:29
  Megan Horneman: It's been a much anticipated report.
• 0:31
  Megan Horneman: It's for the month of July.
• 0:33
  Megan Horneman: And the report came in pretty much on the spot when it comes to expectations.
• 0:38
  Megan Horneman: So on a month-over-month basis, the headline consumer price index rose one-tenth of a percent.
• 0:45
  Megan Horneman: That's after a 0.4% decline last month.
• 0:48
  Megan Horneman: The core CPI rose two tenths.
• 0:51
  Megan Horneman: That was after a flat reading last month.
• 0:53
  Megan Horneman: The CPI on a year-over-year basis rose 3.5%.
• 0:58
  Megan Horneman: That's the headline number.
• 1:00
  Megan Horneman: And then the core number rose 2.5%.
• 1:02
  Megan Horneman: Both of these were about a tenth lower than the rise in the last month.
• 1:06
  Megan Horneman: So most when you look at the markets today, they're celebrating this.
• 1:10
  Megan Horneman: It came in as expected.
• 1:12
  Megan Horneman: It is slightly lower than last month, but as expected isn't good enough, in our opinion.
• 1:18
  Megan Horneman: When you look at some of the details in this report, we're still showing that there is a lot of pressure for Americans in this inflation data.
• 1:25
  Megan Horneman: Some of this is quite sticky.
• 1:27
  Megan Horneman: We look a lot at the service sector because that is where Americans spend the most of their money.
• 1:33
  Megan Horneman: And what we're seeing is that the service inflation actually, after rising 0% last month, jumped to rising 0.2%.
• 1:41
  Megan Horneman: So we're back on that upward trend.
• 1:44
  Megan Horneman: 0.2 isn't awful, but again, we're trending the wrong direction with this.
• 1:48
  Megan Horneman: On a year-over-year basis, it's up 3.1%.
• 1:51
  Megan Horneman: When you X out energy, which is a very volatile item, it also rose 0.2%.
• 1:57
  Megan Horneman: So it's growing about 3% on a year-over-year basis.
• 2:00
  Megan Horneman: We saw pressure in owner's equivalent rent that um did slow a bit last month, the prior month, but is back up again.
• 2:08
  Megan Horneman: Um in apparel, we saw a rebound in that.
• 2:11
  Megan Horneman: Airline fares are up 25% on a year-over-year basis.
• 2:15
  Megan Horneman: And then things like education and communication, um, they rose 0.6% for the month.
• 2:20
  Megan Horneman: So there is pressure underneath of this.
• 2:23
  Megan Horneman: We are happy that it didn't come in higher than expected.
• 2:26
  Megan Horneman: But this isn't necessarily something to completely cheer about.
• 2:30
  Megan Horneman: You're gonna read that the Fed will most likely stay on hold in September because of this data.
• 2:35
  Megan Horneman: It's a little early yet.
• 2:36
  Megan Horneman: We still don't have the PPI, which is the producer price index that we'll get next um tomorrow, and then the PCE, which we will also get um in the coming weeks.
• 2:45
  Megan Horneman: And that is the Fed's preferred inflation indicator.
• 2:48
  Megan Horneman: What do we think about this and what the Fed's gonna do?
• 2:51
  Megan Horneman: First of all, Core CPI has been above the Fed's target for 63 months.
• 2:57
  Megan Horneman: And even though it's coming in as expected, this compounds month after month after month for consumers.
• 3:02
  Megan Horneman: There has to be something done about this.
• 3:05
  Megan Horneman: What the Fed has been doing for the past five years is not working.
• 3:09
  Megan Horneman: Um, we do think that the Federal Reserve that's in place right now is very hawkish.
• 3:14
  Megan Horneman: So we're not taking September off the table yet.
• 3:16
  Megan Horneman: There's still some more data pieces.
• 3:18
  Megan Horneman: We do think for sure you'll get at least one rate hike this year, whether that's September or December.
• 3:23
  Megan Horneman: We'll get that information here in the coming weeks to get a little bit more clarity.
• 3:27
  Megan Horneman: But our opinion, the Fed does need to raise rates.
• 3:30
  Megan Horneman: We do need to slow this liquidity that's in the system to bring these inflation levels down.
• 3:36
  Megan Horneman: That's all we have today.
• 3:37
  Megan Horneman: We'll be back with the producer price index tomorrow.
• 3:40
  Megan Horneman: And if you want a history of our podcast, you go to marketswithmegan.fm.
• 3:43
  Megan Horneman: Thank you.