Too good

The inflation report for November was published yesterday. After skipping October due to the government shutdown, the November report was highly anticipated, even after knowing that it was going to be after the FOMC meeting of last week. The report showed a super benign price behavior in the overall number and the Core, much better than anticipated by every economist that dared to forecast it. The reason? The shelter component. As you can see seeing the chart below, you can see that the teme has been bromeen abruptly: rents have dropped in two months as of the country was in recession or in a pandemic. The credibility of th BLS is being questioned even more, as this figure is just too good to be true and too pleasing to Trump’s view of the monetary policy, where rates “need to be” lower. Bonds and the dollar index seem to have taken the bait, and are comfortably trading around the same levels they were prior to the report. Now we only need to take care of unemployment. If this new trend is confirmed in January, rates will be lowered in the next meetings.

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