Fed plans to raise rates as soon as March to cool inflation

[Tintrlvr]

It seems what drove up the latest inflation number is rents.  If so that is a lagging indicator since many rent contracts most recently neglected might and most likely are reflecting the rise in the rental market that took place months ago.  In that sense, these are grounds to believe that this surge might subside the next data points.  Still just to make sure I still think it is best that the Fed push rates up to 4.5% and beyond.  It can always lower them later.

There's probably still a ways to go, unfortunately. I didn't realize how behind CPI was compared to other measures of rents.

Yes.  My point is that inflation might be running at over 8% but the average person might not be "experiencing" 8% anymore due to rent component catchup.  For most people, the rental market became crazy a year ago which they experience but is only now showing up in CPI numbers.

That might mean that raising interest rates too high might be unnecessary.

Agreed. If inflation is already really only running at 10-20 bps a month (taking into account diving gas prices but also lagging rent data), then inflation is back to a "normal" level already. That doesn't mean we should lower interest rates, but it does mean that we should consider not raising them too much more than present and perhaps even slightly lower than market expectations.

It's odd that the August report was presented as negative when it actually looks quite positive.

[Tintrlvr]

It seems what drove up the latest inflation number is rents.  If so that is a lagging indicator since many rent contracts most recently neglected might and most likely are reflecting the rise in the rental market that took place months ago.  In that sense, these are grounds to believe that this surge might subside the next data points.  Still just to make sure I still think it is best that the Fed push rates up to 4.5% and beyond.  It can always lower them later.

There's probably still a ways to go, unfortunately. I didn't realize how behind CPI was compared to other measures of rents.

Yes.  My point is that inflation might be running at over 8% but the average person might not be "experiencing" 8% anymore due to rent component catchup.  For most people, the rental market became crazy a year ago which they experience but is only now showing up in CPI numbers.

That might mean that raising interest rates too high might be unnecessary.

Agreed. If inflation is already really only running at 10-20 bps a month (taking into account diving gas prices but also lagging rent data), then inflation is back to a "normal" level already. That doesn't mean we should lower interest rates, but it does mean that we should consider not raising them too much more than present and perhaps even slightly lower than market expectations.

It's odd that the August report was presented as negative when it actually looks quite positive.

A lot of great deals in the stock market from today, then.

I'm a buy-and-hold sort of guy. In any case I can't (easily) trade in individual stocks due to my job.

[Tintrlvr]

Fed Fund swap trading indicates that the marker expects rates to peak sometime next year at 4.5%  If such expectations ends up than that expect equity markets to fall some more from here.

Two 75s would get us to 4.

75-50-50-25 seems much more likely for getting to 450 bps. Although I wouldn't be surprised if the second 50 is 25 and then from there on whether more 25 bps increases are considered would depend on the strength of the economy at the time.

Topline inflation numbers are going to start collapsing in December as earlier large increases start being compared against, and that's going to create pressure to stop raising rates so much if at all.

[Tintrlvr]

Personal Savings Rate 3M Moving Average ⁦hits record low.  Pretty much all the cash handed out during COVID-19 is being burned up.  Good news on the inflation front.  Pretty soon cash for unsustained consumption will run out and prices will finally stop increasing and then start to fall.

I think this chart only goes through July, but this seems to suggest a lot of COVID-era savings remain, notwithstanding low savings rates now (chart is excess above February 2020 total savings).