CPI Inflation Report: Fed Cutting Rates, Money Printing Next!

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Video Summary

The September CPI inflation report showed headline and core inflation both at 3%, a figure that, while above the Federal Reserve's 2% target, has seen minimal impact on the projected interest rate cut for the upcoming meeting. Despite inflation trending upwards since April, the Fed is expected to proceed with a 0.25% rate cut, citing the situation as temporary and necessary to support labor markets. The analysis highlights a potential shift in Federal Reserve policy, with indications that the current tightening cycle may end soon, potentially this month, and a prediction of significant money printing in 2026, which could exacerbate inflation.

A notable discrepancy exists between the official government inflation figures and the experiences of many Americans, with a significant portion reporting substantial increases in household expenses, particularly for groceries. The transcript also touches upon the Federal Reserve's struggle with credibility regarding its long-standing 2% inflation target, as forecasts consistently fail to materialize within the projected timelines. The overarching sentiment is that inflation is likely to worsen due to impending monetary easing and money printing

Short Highlights

September CPI headline and core inflation both reported at 3%.
Federal Reserve expected to cut interest rates by 0.25% at the next meeting.
Odds for a 0.25% rate cut increased slightly to 96.7% after the inflation report.
JP Morgan predicts the Federal Reserve's tightening cycle may end this month, with money printing anticipated in 2026.
75% of Americans report a household expense increase of at least $100 monthly since President Trump took office, with groceries being the top concern.
Fed's 2% inflation target has been consistently missed in forecasts for yea

Key Details

CPI Inflation Report for September [00:00]

The CPI inflation report for September was released, showing both headline and core inflation at 3%.
This report was delayed due to a government shutdown.
Both headline and core inflation figures are significantly above the Federal Reserve's target of 2%.

"Okay, first of all, I just want to say this to bring you up to speed. This CPI inflation report is for the month of September, and this was supposed to be released last week, but it got delayed until today because of the government shutdown."

Federal Reserve's Interest Rate Decision [00:24]

A key question is how the new inflation data will influence the Federal Reserve's decision on interest rates next week.
Despite inflation being above the 2% target and showing a reversal of progress since April, the Fed is still likely to cut interest rates.
The rationale for a rate cut includes the belief that the inflation situation is temporary and that a cut is necessary to prevent further weakness in the labor markets.
The odds of a 0.25% rate cut before the report were 98.3%, and after the report, they slightly decreased to 96.7%.

"The Federal Reserve is trying to get inflation down to 2%. Right? However, I mean, just think about it. Whether you're using headline inflation or if you're looking at core inflation, it doesn't matter which one you're looking at because both of them are well above the 2% target that they want to be at."

Monetary Policy: Tightening and Easing [02:47]

The process of removing money from the system to slow inflation is called quantitative tightening or balance sheet runoff.
The Federal Reserve is currently in a tightening phase.
Hints from Fed Chair Jay Powell suggest the tightening cycle will end soon.
JP Morgan has moved up its prediction, now forecasting that the tightening cycle could end this month, with money printing expected to commence in 2026.

"When the Federal Reserve prints money, which is, you know, of course inflationary, they call that quantitative easing or balance sheet expansion."

Future Rate Cut Expectations [04:06]

The likelihood of a 0.25% rate cut at the December meeting has increased.
Before the inflation report, there was a 91.8% chance of a December cut.
After the report, this expectation rose to 96.3%.
If both cuts occur, the Fed funds interest rate would fall from 4.25% to 3.75%.

"So, listen, that's how the CPI inflation report has impacted the Federal Reserve and their interest rate decisions for the remainder of the year."

Public Perception vs. Official Inflation Figures [04:59]

President Trump claimed inflation was at 0%, contrasting sharply with the official 3% CPI report for September.
The speaker believes the actual inflation rate is likely double what the government reports, especially before further rate cuts and money printing.
Many Americans do not perceive 0% inflation and believe inflation is still ongoing.
75% of Americans report a monthly household expense increase of at least $100, and 40% report an increase of $500 or more since President Trump took office.
Groceries were cited as the expense that increased the most.

"However, I mean, you could tell me how you feel or what you're seeing, but many Americans are not seeing that 0% inflation rate."

Federal Reserve's Inflation Target Credibility [07:10]

The Federal Reserve states its goal is to bring inflation down to 2%, but projects it will take another 18 to 24 months.
This projection has been consistent for the past four years.
Fed Governor Stefan Moran estimated reaching 2% inflation about a year and a half from now.
A reporter at a past Fed press conference challenged Chair Jay Powell on the Fed's consistent failure to meet its 2% inflation target within projected timelines, questioning the Fed's credibility.

"But I just want you to know what's been happening. The Federal Reserve, they keep on saying that, oh, we need another 18 to 24 months. They keep on saying 18 to 24 months. They've been saying that for the past four years."

Outlook on Future Inflation [09:58]

The Federal Reserve is cutting interest rates, which is inflationary due to easier monetary policy.
The money tightening is expected to end soon, with significant money printing anticipated, possibly in 2026.
The assessment is that the inflation situation is likely to worsen.