[00:02] this morning and I want you to keep in mind that this report covers February. energy prices that we're seeing today in March. February, CPI inflation rose at a pace of 2.4%
[00:16] and this was in line with market expectations. Core inflation was at Now, I want to show you the trend, but before we proceed to that, I want to give you this quick disclaimer and I'm just speaking honestly here.
[00:29] So I just want to say that I don't have much faith in the reliability or accuracy of these numbers. However, it's still important to know what the narrative is because that's what the the federal government
[00:42] base their decisions on, the story, the narrative. So I'm just saying that the CPI inflation report should be treated as fictional literature. That's just my opinion, no different than a sci-fi
[00:54] short story or a romance novel. Okay, with that being said, yes, we have made a lot of progress since the rate of inflation peaked back in 2022. rate of inflation has come down substantially. I mean, it's noticeable.
[01:11] So yes, we have made progress because interest rates are no longer 0% and the Federal Reserve has slowed down the rates of money printing. And here we are today at an inflation rate of 2.4%.
[01:25] But I just want to say like please make note of this that this does not mean that prices have been coming down. No, it means that prices are still going up. They're just going up at a slower rate than compared to before. Another thing
[01:39] that I want you to keep in mind is that although overall inflation increased at a rate of 2.4%, that's just the overall average based on their calculations. So the goal of the Federal Reserve is to
[01:51] get the rate of inflation down to 2.0%. So 2%, that's the target. That's the target rate. However, seven out of the 10 components However, seven out of the 10 components in the CPI were rising faster than 2%.
[02:06] your individual categories that are going up way faster. For example, going up way faster. For example, daycare is up 3.7%. That's the rate of inflation. Furniture is up 3.9%. Food outside the home is up 3.9%.
[02:21] Food outside the home is up 3.9%. Medical care is up by 4.1%. Admissions to movies, so movie tickets up by 5.5%. Airfare has been going up by 7.1%. Candy is up by 11.6%.
[02:36] Beef is up 14.4% and home health care is up by 15%. additionally, the overall CPI number is artificially being suppressed right now
[02:50] government shutdown, which portrays housing inflation lower than it really is. And on top of that, we all know what's going to happen to the inflation for March that's going to be due next month because of the higher energy
[03:05] So, I just want to give you a preview of what's to come. what's to come. And here the stats as of today. In the US, the national average for a gallon of gasoline is at $3.58.
[03:18] Yesterday, it was at $3.54. A week ago, it was at $3.20. A month ago in February, it was at $2.94. was at $3.08. That's 16% higher compared to last year.
[03:35] for March, it's going to be ugly, but that's the expectation. But you know what? I would say more importantly, just take a look at the price of diesel fuel. I mean you're going to need diesel to run machinery, large vehicles. I mean
[03:49] you're talking about from agriculture to transportation to shipping. And if this input price goes up, then what's going to happen? going to pass down the cost, the rising cost to consumers. You know, that's
[04:03] going to be on anything that's farmed, transported, or shipped, which is inflation. So, diesel is at $4.83 a gallon right So, diesel is at $4.83 a gallon right now. Last month, it was at $3.67.
[04:18] now. Last month, it was at $3.67. Last year, it was at $3.63. So, when you compare February of this year to last year, it was basically flat, no inflation there. But if you compare today compared to
[04:31] last year, that is a 33% increase year-over-year. So, listen, I'm just warning you that March is going to be ugly. to know, that the costs from the businesses
[04:44] will not be fully passed down to the consumers in March because it's going to take some time. So, if this thing drags on in the Gulf, then April's going to be even uglier as the costs get fully or more pushed down
[04:57] from the businesses to the consumers. And as the rate of inflation is expected to rise in March and going forward, that's going to make it more difficult rates because if they cut interest rates,
[05:10] then that's going to be inflationary. Anyways, I want to show you the odds, rate cuts, and this is according to the CME FedWatch tool. going to be on March 18th. So, that's going to be next week on Wednesday.
[05:24] Before the CPI inflation report, it was already a given that they can't cut interest rates at this upcoming meeting. There was a 99.4% chance that they would not cut rates in March. And after the CPI inflation report, here
[05:38] are the new odds. And if you notice, it didn't change. So, that's not an error. They didn't move. The market expectation is clearly no rate cut in March and I I completely agree with the the March expectation. The next Federal Reserve
[05:55] meeting is going to be on April 29th and here were the odds of a rate cut before here were the odds of a rate cut before the CPI inflation reports. An 87.1% chance that they're not going to cut interest rates in April, either.
[06:07] And here are the odds after the CPI inflation reports. So, barely moved. The odds that they will not cut at that meeting changed from 87.1% to 87.3%. And you have to keep in mind that this
[06:22] is going to be Jay Powell's last meeting as the chair of the Federal Reserve. It's going to be the June meeting that's more anticipated because that's when Trump's new Fed chair is going to be at the helm. So, let's take a look at that
[06:34] one. Before the CPI inflation report, there was a 60.7% chance that the Federal Reserve would not cut interest rates in June. After the report, here are the results. The odds that there will not be a rate
[06:48] The odds that there will not be a rate cut in June went up from 60.7% to 63.9%. >> this situation is very tricky. That's just my opinion.
[07:02] Because the new Fed chair basically got the job from Trump with Federal Reserve would cut interest And if this special military operation does not de-escalate or terminate soon,
[07:17] then you're going to have rising inflation in March, in April, in May. And then how are they going to justify cutting interest rates in June? But, I'll tell you that this is my honest assessment that I wouldn't rule out an
[07:31] interest rate cut off the table in June. And here's why. straightforward. They could always come up with lame excuses to cut interest up with lame excuses to cut interest rates in the face of rising inflation.
[07:46] always use the good old "Oh, this rise in inflation is just transitory." Now, of course, nobody's going to buy that, and we've heard that one before, mean that it's going to stop them. Like, they could still use that excuse.
[08:01] They could also use the excuse that the balance of risks is more towards the And because the Federal Reserve has a dual mandate, they can justify rate cuts because of a weakening labor markets. I mean, all I know is that President
[08:15] Trump wants rate cuts, and he's going to go ballistic if he doesn't get them. And sadly, I just want to say that lower interest rates are needed to bail out just a variety of sectors. We're talking about commercial real estate, the banks
[08:30] have bond portfolios underwater, to lower the interest expense paid by the federal government, which is going to be a trillion dollars this year. And also, a trillion dollars this year. And also, yes, the labor market is weakening.
[08:42] we're in a tough spot. It's a tricky situation. There was the ongoing problem of inflation, but now we're facing the danger of a stagflationary environment, which is just a combination of inflation
[08:56] plus slowing economic growth and higher unemployment. All right, so that's the situation. On a side note, I just want to say that the average price of to say that the average price of gasoline in the US is currently at $3.58
[09:09] a gallon. But, I'm not in California. I'm curious I mean, of course, California's known They're notorious for having the highest Thank you for the support. Please subscribe, and I wish you a very nice
[09:22] subscribe, and I wish you a very nice day. Take care.