I am standing by most of my December 31, 2022 prediction where I stated the following:
-The Federal Reserve conducts a shocking 0.50% rate increase in March after 0.50% in February, after a shocking CPI reading of 8.5% annualized reading in February. The PCE core rate remains stubbornly above 6% and wage inflation hits the Feds original schedule to stabilize rate increases. Markets crater as a result.
Obviously we will not get an annualized reading of 8.5% year over year as the rate of change will not appreciate that substantially, although if it does, I need to drink more scotch as I make predictions. I am standing by the shocking 0.50% rate increase from the Fed and the inflation reading the BLS is about issue this morning is why.
I think that the CPI-U reading annualized will come in hot closer to 6.4% this morning. From an on the ground perspective and keeping in mind the BLS methodology, there was no indication of declining or moderating prices in numerous categories; especially finished goods for consumer use. I look for food for home consumption, used cars, new cars, owner’s equivalent rent, utilities, unleaded gasoline, and services to increase month over month. This will create a monthly rate increase of 0.54%, something the Fed can not accept in any form.
The more shocking outcome will be the “core” inflation rate which instead of abating will jump a shocking 0.6%. This in addition to a hot PPI number on Wednesday will probably create a bounce in the out of control moves in the bond market which appear now to be nothing more than a flight to safety. Stay tuned as this is going to be another wild day.