What has emerged, pointed out by Omair Sharif, is that the numbers used on the chart are non-seasonally adjusted, which isn’t what is commonly (universally, frankly) used for the m/m CPI numbers.
What it showed was that even if CPI ran at 0.2% m/m until January, the year-over-year reading would rise to 3.9%.
This is problematic for two reasons:
1) If you use the standard seasonally-adjusted numbers, a 0.2% m/m reading would get CPI back to 2.5% in January.
2) If you insist on using non-seasonally-adjusted numbers, there’s a strong downward bias late in the year (because price hikes are usually done at the turn of the year).
Here is what the chart (by Preston Caldwell) shows if re-done for the standard seasonally-ajdusted numbers.
By that measure, a 0.2% m/m reading would be fine for getting CPI on track, especially considering that in March of 2024, the y/y comps begin to get easier.
The takeaway here is that we’re closer to 2% than it seems and it’s what the market is implying. That could change if the combo of housing, commodity prices and wages pickup but a 0.2% SA m/m reading is a fine baseline with what we know about the economy.
This article was written by Adam Button at www.forexlive.com.