Inflation Creeping Lower… But Take a Deeper Look

This morning, the Consumer Price Index (CPI) came out. This is one of two main reads on inflation that comes out every month – the 2nd most important to The Fed. There are a few things I want to point out about these numbers.

Inflation Trends are Looking Good

First, The Fed is driven by inflation and jobs. We talked about jobs last week, which are starting to show some real cracks. These numbers in the video are put together by NBS Highway – thank you for the data!

This data shows the core and headline. You can see that the previous month for headline was 3% and it went down to 2.9%, and we saw a .1% improvement as well on the core numbers. It seems like we are just creeping along here – things are moving slow.

Breaking Down the Numbers

The thing that is interesting about CPI: in the shelter category (rent, owner equivalent of rent, and lodging away from home). Housing is 45% of the calculation, and it ran hot. It’s 2.33% of the total. The other category that we are seeing big increases in is auto insurance.

If you take both housing and auto insurance away, then you are well under the target rate. But we can’t take them away. Housing is the most expensive thing out there, but it turns out that rents are actually coming down.

There is a lot of reason to believe that we are going to see these numbers coming down. Another thing to consider is that if we look at the three last months of this reading (a 3-month average), everything is running under the 2% target.

Are We Heading in the Right Direction?

So we are definitely heading in the right direction, and we are seeing that come through in interest rates. This morning, another data point that came out is that there was a 35% increase in refinances. If you have bought a house in the last few years, then you are getting really close to it making sense to refinance. I’d love to talk to you about that if you are looking at your options.

There is a lot of hope in these sorts of numbers that are making us believe that inflation is coming down, which will trigger The Fed, and the markets will like that, etc. I think we will continue seeing improvements in the future, but time will tell!