I don't know why this isn't being discussed more...
In fact, I'm the only one talking about it!
The YoY inflation rate for all items less energy in the CPI just reached its lowest levels since Mar.'21, up +2.5% YoY.
The Fed can't control crude oil prices.
And the good news is that this datapoint indicates that the uptick in crude oil prices in 2026 hasn't caused a ripple effect down the supply chain into consumer prices.
That's why this datapoint is so important.
It shows that broad-based disinflation is still intact.
So why would the Fed hike in that kind of environment, knowing full well that a hike won't do anything to crude oil prices, which is the ONLY driver of the acceleration of inflation in 2026?
The fact of the matter is that ALL OTHER components within CPI are experiencing the lowest aggregate inflation rate in 5+ years.
This is why I think the Fed will stay paused and that the MOST LIKELY next directional move will be a cut... not a hike.
Embrace nuance.
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