Inflation deflates but debates inflate
Broad conclusion: inflation is easing
The gurus are now debating ‘will it stay or will it go’ with respect to the lower CPI prints.
Seasonally, we are going into a higher spend part of the year with back to school & the associated increases in business spending (this effect also shows up on the professional services side where there is a post-summer flurry of sales activity).
When compared to last year, these CPI prints seem to be a lot less volatile - so it would seem that things are more under control as well. Notice below the large up/down swings through the first half of the year during 2022 (blue line) compared to the much smaller movements this year (orange line).
US treasury bond yields continue to rise this year but remain under the highs from late 2022/early 2023.
A breach of these highs doesn’t feel all that unrealistic especially if we look at what the overnight rate futures are doing (SOFR). Date range below is from today to Sept. 2024
The futures curve is dropping starting in February but still elevated compared to what it has been for the past few weeks…”higher for longer”.
Do you think inflation is easing or is this just a fake-out? Let us know what you think