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Inflation Watch A mid-month focus on inflation via Traditional Indexes, Commodity Prices, and Labor Costs

Jun 10 2020

Some Green Shoots Of Reflation?

  • Jun 10, 2020

May’s month over month CPI results missed expectations but rebounded from April’s plunge. Deflation is still on the table but several indicators have bounced off their lows. Inflation results are less meaningful as large segments of the Index are inaccessible to consumers.

May 13 2020

COVID-19 Impact Showing Up In Inflation

  • May 13, 2020

The CPI numbers missed expectations. COVID-19 is the divide between inflation winners vs losers. Our inflation scorecard continues to point to lower inflation and it’s driven by a demand shock. Lower capacity utilization and money velocity also indicate a disinflationary trend ahead.


Apr 14 2020

Inflation Takes A Backseat

  • Apr 14, 2020

The CPI numbers missed expectations. The segments most affected by COVID-19 were the biggest detractors. The market isn’t too concerned about weak inflation at this point, because there are much bigger issues at present, such as liquidity and financial conditions.

Mar 12 2020

Saved By Zero (Fed Funds)?

  • Mar 12, 2020

February’s “Coronavirus Free” CPI data came in a tick hotter than expected. The massive downdraft in risk assets will be extraordinarily deflationary and we question whether the Fed can ride to the rescue once again.


Feb 14 2020

Inflation In-Line & Scorecard Neutral

  • Feb 14, 2020

Where inflation goes next will be primarily determined by the probability of a recession.

Jan 14 2020

Fed Keeping Both Feet On The Wheel

  • Jan 14, 2020

Headline and Core CPIs both post slower than expected gains in their month-over-month figures. The Fed’s laissez-faire attitude for 2020 seems appropriate for now. Interesting movements in commodity indexes may signal future upward price pressure.


Dec 13 2019

Inflation Porridge Is Just Right

  • Dec 13, 2019

Wednesday's report contained no datapoints that might sway Fed policy. After three cuts in 2019 and a restart of quantitative easing, a recession that felt almost imminent at the beginning of the year seems to have been avoided.

Nov 13 2019

Inflation In-Line & Scorecard Neutral

  • Nov 13, 2019

 The CPI numbers are largely in line with consensus. Where inflation goes next will be primarily determined by the probability of a recession. A near-neutral inflation scorecard is consistent with our slowdown but no recession view.

Oct 11 2019

Inflation—Not Much To See

  • Oct 11, 2019

The Core CPI is in line with consensus. The recent string of weak economic numbers has increased the odds of an imminent recession. A currency pact with China would serve to cap the upside in the dollar and may even help weaken it, providing support to inflation.

Sep 12 2019

Reaching A Crossroads

  • Sep 12, 2019

The Core CPI registered its highest YOY increase of the past year. However, a recent NY Fed survey and other inflation forecasts seems to point to softening expectations. During Fed easing regimes, the CPI has been a good indicator of how aggressive the Fed needs to be. The next few months will be critical in assessing our economic situation.


Aug 13 2019

Inflation Slightly Better Than Expected

  • Aug 13, 2019

The Core CPI is slightly ahead of consensus. Recent depreciation in the Chinese Yuan is disinflationary. Given the seasonal tendency for better economic numbers in the second half of the year, inflation would likely rise moderately along with the economy once we turn the corner.

Jul 12 2019

Core CPI Slightly Better Than Expected

  • Jul 12, 2019

The headline CPI numbers are in line while Core CPI is slightly ahead of consensus. Higher tariffs are not showing through import prices yet. Global slowdown underpins recent inflation path.


Jun 13 2019

May Inflation—Dude, Where’s My Rate Cut?

  • Jun 13, 2019

The latest batch of softer than expected inflation figures gives the Fed more cover for a rate cut. Consumer inflation expectations are now the lowest in two years. Housing price increases remain critical to overall inflation.


May 13 2019

April Inflation—A Sideshow To Trade Talk

  • May 13, 2019

The latest CPI numbers are slightly lower than market expectations. Oil prices need to be watched closely as further oil weakness would likely drag down inflation expectations too. Concerns about new tariffs causing higher inflation are misplaced.


Apr 11 2019

Inflation Remain Contained

  • Apr 11, 2019

The latest CPI numbers are largely in line with market expectations. The recent rebound in oil prices certainly helped the recovery in inflation expectations. Recent U.S. economic numbers have been decent overall and the latest uptick in the U.S. ISM index also offers support for inflation.


Mar 12 2019

Don’t Hold Your Breath On Inflation

  • Mar 12, 2019

The latest CPI numbers were slight misses and at the bottom end of their contemporary ranges. The recent rally of risk assets might be the only tail wind we can find for future inflation. The stark difference in durable and non-durable goods inflation is an excellent study in globalization.


Feb 14 2019

Inflation Stable

  • Feb 14, 2019

The latest CPI numbers are largely in line with market expectations. The Fed pause and other central bank easing moves are positive for risk markets. Watch cyclicals/defensive relative performance and ISM for near term direction.


Jan 14 2019

Inflation In Line And The Fed Will Pause

  • Jan 14, 2019

The latest CPI numbers matched market expectations. Lower oil and stock prices are disinflationary. China will lead the U.S. in inflation and currencies.


Dec 13 2018

Inflation—Conditions Right For Fed Pause

  • Dec 13, 2018

Lower oil prices are dragging down the headline number. Markets are urging the Fed to take a pause in hiking. Core inflation remains in a healthy, tight range. Wealth effect concerns may drag on future price increases.


Nov 15 2018

Inflation—In Line Again

  • Nov 15, 2018

The latest CPI numbers matched market expectations. Lower oil and a strong dollar are disinflationary. Cooling trend in the housing market is worth close monitoring. Global inflation surprises provide supportive backdrop.


Oct 12 2018

Inflation—Another Small Miss

  • Oct 12, 2018

The latest CPI numbers missed market expectations. The problem is not with the actual CPI numbers, but merely the fact that market expectations are still a tad too high. More disconcerting is the cool trend in housing inflation.


Sep 13 2018

Inflation Pumps The Brakes

  • Sep 13, 2018

 Both Headline and Core CPI figures came in below expectations and backed off their contemporary highs. The overall inflation picture is little changed and the market is still pricing in two more 2018 rate hikes. Inflation in Goods is starting to catch up to Services.


Aug 13 2018

Inflation—Another Yawner

  • Aug 13, 2018

The year-over-year headline number was in line with market expectations. Inflation has taken a back seat to trade war and the market seems complacent about the potential impact of trade war. Trump is right to talk down the dollar as a stronger dollar is disinflationary.


Jul 12 2018

Inflation—Largely In Line

  • Jul 12, 2018

The year-over-year headline number was in line with market expectations but the month-over-month increase missed market consensus (0.1% vs. 0.2% expected). All else being equal, there is a good chance CPI might have peaked for 2018. A stronger dollar is disinflationary while the short term impact of tariffs is higher import prices.


Jun 12 2018

Inflation—No Surprises Here

  • Jun 12, 2018

Headline and Core CPI figures hit estimates right on the nose in May, continuing the trend of modest but not outrageous price increases. Energy prices have boosted headline CPI while core CPI continues to be driven by services. With both of the Fed’s mandates pretty much accomplished, appreciate this rare window of time.


May 10 2018

Inflation—A Small Miss

  • May 10, 2018

We have seen a string of in-line/slightly subpar inflation numbers (including wages) both here in the US and overseas. Two countervailing market forces are at work too: a resurgent dollar and higher oil/commodities prices. Financial conditions would tighten quite a bit if both the dollar and the real yields are up significantly.


Apr 12 2018

Inflation—No Break-out Yet

  • Apr 12, 2018

Despite the rare decline in the monthly reading, overall inflation trends are positive and in-line with expectations. A break-out on the upside has not happened yet. Inflation break-even rates are also well within the recent range. The overall picture for inflation is positive but uncertainties are higher.

Mar 14 2018

Inflation—Everything In Line

  • Mar 14, 2018

The latest headline and core numbers are in-line with expectations. The breakeven rate retreated from the resistance level but the yield curve flattened again. Despite the overall mixed bag of macro data, there are more positive signs for inflation.We have been recommending patience when it comes to inflation because overall inflation trend is still pretty well contained.

Feb 14 2018

Inflation—Suddenly Relevant

  • Feb 14, 2018

The headline and Core CPI numbers for January both came in hotter than expected. Despite the resurrected interest and concerns about inflation we still haven’t caught inflation fever. Because of the narrative (correct or not) look for increased volatility surrounding inflation announcements.


Jan 16 2018

Inflation—A Small Upside Surprise

  • Jan 16, 2018

The latest Core CPI number beat expectations but the yield curve flattened. The market shows more conviction about the Fed’s rate hikes than longer term inflation. We recommend patience and we don’t believe missing out on the first few months of higher inflation will cost us dearly.


Dec 14 2017

Inflation-As Flat As The Yield Curve

  • Dec 14, 2017

The latest Core CPI number disappointed again. The divergence between inflation break-evens and the yield curve is puzzling. Given the lack of inflationary pressure and the Fed’s projected rate path, it would not surprise us to see a flatter curve without the help of fiscal stimulus in the next few months.


Nov 16 2017

Inflation-Yield Curve Too Flat

  • Nov 16, 2017

The latest CPI numbers are in-line with expectations. The divergence between inflation break-evens and the yield curve is worth close monitoring. Given that the global recovery is still intact, we don’t think the current inflation picture justifies the flatness of the yield curve.


Oct 13 2017

Inflation - Goldilocks Still Intact

  • Oct 13, 2017

The latest CPI numbers missed expectations but we consider it a passable reading.

Sep 15 2017

Inflation-First Upside Surprise In Six Months

  • Sep 15, 2017

While still too early to call an upturn in inflation, we believe at least expectations are perhaps low enough to make the odds in favor of upside surprises in the near term. We don’t think one small beat on the CPI is likely to turn the Fed more hawkish at the upcoming September FOMC meeting.

Aug 11 2017

CPI Weakness Is Broad-Based

  • Aug 11, 2017

The CPI numbers have disappointed five months in a row. The real bad news for inflation hawks is that the weakness in core CPI is broad-based. There is hope for inflation to stem its recent weakening trend soon as the Chinese CPI has already stabilized and started to turn up.


Jul 14 2017

Inflation Slip Sliding Away

  • Jul 14, 2017

Temporary and transitory? The CPI numbers have come in below estimates four months in a row.


Jun 15 2017

Inflation Disappoints Again

  • Jun 15, 2017

The CPI numbers have disappointed three months in a row. Weak commodity prices do not inspire higher inflation expectations. The global scope of inflation deceleration adds more weight to the recent soft readings. However, lower bond yields relative to nominal growth rate is inflationary and buffers the impact of weak inflation and rate hikes.


May 12 2017

Inflation Subpar Again

  • May 12, 2017

The latest CPI numbers are slightly weaker than expected. We think expectations for higher inflation are still on the high side. The global scope of inflation deceleration adds more weight to the recent soft readings. Patience is the right approach for the reflation trade at this point.


Apr 19 2017

Inflation-Weaker Sooner Than Expected

  • Apr 19, 2017

The latest CPI is weaker and the softness was sooner than we expected.  More alarming is the recent broad-based deterioration in economic data.  Lower inflation expectations have flattened the yield curve recently, which hurt Financial stocks. We believe inflation has likely peaked for the time being and patience is the right approach for the reflation trade at this point.


Mar 16 2017

A Dovish Hike--Positive For Inflation

  • Mar 16, 2017

The dovish rate hike is a positive for inflation and credit. A hawkish message right now would have been quite detrimental and self-defeating in terms of realizing two more hikes later this year. We believe achieving sustained 2-3% inflation could be harder than most people expect going forward. Overall, we are encouraged by the dovish hike but we think the real test for inflation is when the base effect starts to wane.