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Inflation Prediction as of June 2023 ---- Headline Inflation Headed to 3.2% Come Midsummer

Updated: Jun 14, 2023

INFLATION Forecast update from new information - 6/13 at 9:30 am:

  • Actual monthly came in at 0.1% (predicted: 0.3%)

  • Actual annual came in at 4.0% (predicted 4.2%)

  • For June data due out July 12 we are on track for annual inflation to be 3.0% and MAYBE 2.9%---WOW

  • REALLY good news for the economy. Mortgage rates will decline but will lag.


INFLATION Forecast Summary:


This is a forecast confirmation from our forecast released on May 10, 2023.


Inflation data for May 2023 is due Tuesday, June 13. Likely to be a LARGE Decrease. While large, the optics or media reporting will be muted because we will not cross from the 4% to the 3% range. That will occur on July 12 when CPI will come in at ~3.2%.


The next Fed meeting is June 14. The Fed is unlikely to change policy with this CPI data coming in so close to their meeting date. I anticipate the Fed will hold rates steady and make a statement to the effect:

"That while a continued improvement in inflation is being attained, the Fed will remain vigilant in its efforts to ensure further progress."

The Fed and a Fire Department have something in common. We never hear from them until after a fire. It is not good optics for a Fire Department to say we've conquered a fire when there is a burnt-down house in the background with rising wisps of smoke. Rather the Fire Department will make statements that the fire has been x% contained and crews will remain on-site to ensure the fire does not re-emerge.

 

INFLATION History: Over the past 50 years, the US has had 3 inflationary periods and all related to Oil/Gas prices. Note that as fast as inflation spiked, it fell off just as dramatically.


It is worth noting that mortgage rates do follow the CPI lead but there is a lag time involved. Rates tend to rocket up and feather down---no one wants to be first to lower rates in case the market decreases stall.

 

INFLATION Forecast: The annual CPI total reported each month is a combined string of 12 months of data, think of it as being 12 dominoes, a new one comes on, and the oldest one drops off. THESE are the 2 dominoes to look to see if the CPI will change. If May ’23 monthly rate is 0.3% it will replace the May ‘22 data point of 1.0% on 6.13.23 and the annual CPI will decrease from 4.9% to 4.2%.

 

INFLATION: April 2023 as reported 5.10.23

Predicted May’s CPI to be released 6.13.23

 

It is a guesstimate that May’s monthly rate will be 0.3% when the actual is announced on 6.13.23. It could be higher or lower. As such the ANNUAL CPI for May will change accordingly. Below is a range of May monthly from 0.0% to 0.9%. The resulting annual CPI will range from 3.9% to 4.8%.

 

If any one item in the CPI can quickly and materially impact CPI -- it is energy. While up since the beginning of the year, material changes have NOT occurred.


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