Inflation revisited

This Friday, the 24th, the BLS will bring back some furloughed government workers to calculate the CPI for the month of September. If they were understaffed before the government shutdown, one can only imagine the percentage of goods prices that will be “guessed”. Even if they follow a formal process, which they sure do, when decisions are being made based on decimal points, the margin of error should be contained, and it looks like it won’t be. The good news is, that in practical terms, it doesn’t matter for the rate decision, because the pressure is so big on the Fed to lower rates, they will likely cut, even if inflation ticks up. What’s interesting to note however is that, as you can see below, prices of goods imported in the U.S., are going up, due to tariffs, but the overall impact on the overall inflation appears to be muted, perhaps compensated by the deflationary forces of AI, and that is providing a scape route for the Fed to prioritize and concentrate on the unemployment mandate, and put aside inflation fears. Odds for a cut on October 29th remain high at 94.8%.

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