Latest / Markets with Megan: A Quick Financial Markets Update / 2.5% Core Inflation: Victory or False Alarm? | S3 E128 | 03-11-26

Transcript

2.5% Core Inflation: Victory or False Alarm? | S3 E128 | 03-11-26 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: Well, we didn't get any surprises out of the inflation data this morning.
• 0:03
  Megan Horneman: It is Wednesday, March the 11th, and this is Markets with Megan.
• 0:06
  Megan Horneman: If you like this podcast, subscribe, hit the alarm bell, share it with your friends, family, or colleagues.
• 0:11
  Megan Horneman: We're going to talk today about economic data, and we've been focusing a lot on the war with Iran.
• 0:16
  Megan Horneman: So we haven't really delved into some of the economic data that we're getting, but the CPI report is always heavily scrutinized.
• 0:22
  Megan Horneman: And this morning it came in as expected at both the headline level and the core level.
• 0:28
  Megan Horneman: So at the headline level, which includes all of the different um price baskets, that was up, it's up 2.4% on a year-over-year basis.
• 0:36
  Megan Horneman: And then the core level is slightly higher, rising 2.5% on a year-over-year basis.
• 0:41
  Megan Horneman: So still not where the Fed wants it to be.
• 0:44
  Megan Horneman: But when we look underneath of this, we realize that the headlines are talking about how this was such a tame report.
• 0:49
  Megan Horneman: And it was tame.
• 0:51
  Megan Horneman: Typically, this was tame in fact for February, which February has a seasonal pattern to it where you tend to get a little bit of upside in prices because in the beginning of a calendar year, businesses may be more inclined to try and increase prices and get that through for that year.
• 1:06
  Megan Horneman: So they do that early on in the year.
• 1:08
  Megan Horneman: So this was tame from a seasonal perspective, but there's trouble brewing underneath that we still are not convinced inflation is completely behind us.
• 1:16
  Megan Horneman: And when we look at the service sector, which is where Americans spend the most of their money and what hurts the most, if you look at energy services, so this is utility and gas service, it's it's rising 3.1% on a month-over-month basis.
• 1:32
  Megan Horneman: It's up 10.9% on a year-over-year basis.
• 1:35
  Megan Horneman: And we often know that you know just affordability in general is a problem for Americans.
• 1:40
  Megan Horneman: When you take out energy, it rose six-tenths of a percent.
• 1:44
  Megan Horneman: Um, when you look at it's up 4.1% on a year-over-year basis.
• 1:48
  Megan Horneman: And then that is medical care services.
• 1:52
  Megan Horneman: Actually, I'm sorry, the medical care services that rose 0.6%.
• 1:56
  Megan Horneman: So that's excluding your all the energy.
• 1:58
  Megan Horneman: But when you look at medical care services, which is a problem for Americans, they're right, they're rising 4% on a year-over-year basis.
• 2:05
  Megan Horneman: And when you take out shelter costs, because shelter does make up a big portion of the CPI index, if you take out the the shelter services, that is it's still rising 3.3%.
• 2:16
  Megan Horneman: So nowhere near where the Fed wants it to be.
• 2:19
  Megan Horneman: We also started to see some impact from the rise in things like aluminum prices at the end of last year, also the shortage of semiconductor chips.
• 2:28
  Megan Horneman: You saw electronics rise.
• 2:30
  Megan Horneman: Um, you're seeing uh from the metal prices, you're seeing things like um household energy, carbonated drinks, which are rising, um, furnishings, and then there may be some tariff impact here because we did see um apparel prices.
• 2:43
  Megan Horneman: We're also seeing food prices rise.
• 2:45
  Megan Horneman: So all of these categories that really impact um consumers are not really letting up.
• 2:51
  Megan Horneman: So this is concerning because that while this is a February report, we had some inflation pressures brewing before the war with Iran.
• 3:00
  Megan Horneman: And now we're talking about a much bigger energy situation here and how much does that filter into inflation?
• 3:06
  Megan Horneman: Now the Fed meets March 18th.
• 3:08
  Megan Horneman: We don't think they're gonna do anything even with this routine report and a weak uh labor market report.
• 3:13
  Megan Horneman: And that's primarily because we need to see how this situation pans out from an energy perspective.
• 3:18
  Megan Horneman: They don't want to be cutting rates into a very inflationary risk scenario.
• 3:23
  Megan Horneman: That's all we have today.
• 3:24
  Megan Horneman: If you want a history of our podcast, you can go to marketswithmegan.fm.
• 3:27
  Megan Horneman: Thank you.