Contact us
CALL US NOW 1-888-GOLD-160

Plenty of Hype for a So-So CPI Report

  by    0   0

Why do virtually all the mainstream pundits think the Federal Reserve has won the inflation fight?

Maybe it’s just wishful thinking. They want the Fed to win so it can go back to what it does best – creating more inflation with artificially low interest rates and quantitative easing.

Regardless, most of the mainstream punditry hyped the November CPI report as more positive news on the inflation front. The CNBC headline reflected the consensus – inflation “slowed” last month.

Except it really didn’t.

The only number that fell was the headline annual CPI. It dropped a tick from 3.2% in October to 3.1% in November, according to the latest Bureau of Labor Statistics data. Every other number indicated persistent, sticky price inflation.

Month on month, prices rose 0.1%. The expectation was for prices to remain flat as they did in October. The CPI ticked up despite another big dip in energy prices.

Stripping out more volatile food and energy prices, core CPI rose by 0.3%. That was up from 0.2% in November but in line with estimates. The annual core CPI was 4.0%, unchanged from the prior month.

Looking at the monthly increases so far in 2023 reveals that core CPI remains sticky. It rose by 0.4% in January, 0.5% in February, 0.4% in March, 0.4% in April, 0.4% in May, 0.2% in June and July, 0.3% in August and September, 0.2% in October, and 0.3 in November. That averages to 0.33% per month or 4.0% annually – still more than double the Fed’s 2% target.

In fact, core CPI has been hovering in the 4% range since July.

To put the monthly core CPI increase in perspective, it would need to average just under 0.17% to hit the 2% annual target.

The report also showed a sudden uptick in “supercore” inflation – stripping out shelter costs along with food and energy.

Keep in mind, inflation is worse than the government data suggest. This CPI uses a formula that understates the actual rise in prices. Based on the formula used in the 1970s, CPI is closer to double the official numbers.

Even accepting the government data, every number remains well above the Fed’s 2% target.

Another big 2.3% month-on-month decline in energy prices helped push the overall CPI lower. Gasoline prices fell by 6% and fuel oil costs dropped 2.7%.

Price rose in most other categories.

Services (minus energy services) CPI charted a 0.5% increase on a monthly basis. That was up from 0.3% in October. The annual increase came in at 5.5% for the second straight month. Service prices are considered a leading indicator of future price inflation.


As already noted, most mainstream headlines trumpeted the CPI report as another sign that price inflation is cooling.

Charles Schwab chief investment strategist Liz Ann Sonders told CNBC the Fed “will probably talk about continued disinflation being good news.”

President Biden said the CPI report showed “more progress” in bringing down inflation. Treasury Secretary Janet Yellen said she believes inflation is coming down “meaningfully.”

“I see no reason, on the path that we’re currently on, why inflation shouldn’t gradually decline to levels consistent with the Federal Reserve’s 2% target,” she said.

Stock indexes were up and gold generally held steady, indicating market optimism that the report would not push the Fed to resume rate hikes,

But the latest CPI report did dampen optimism that the Federal Reserve would start cutting interest rates in March. After the data came out, traders pushed the likely start date for rate cuts to May 2024.

As Peter Schiff pointed out after the October CPI came out, core CPI remains double the Fed target of 2%, and he said nothing indicates we’re heading toward two.

Just because we’re at four now doesn’t mean we’re going to two. We could just as easily double and go back up to eight. There’s no reason to just conclude that that’s where we’re headed. But even at four, we’re still way above the Fed’s target of 2%.”

As already mentioned, the mainstream wants the Fed to claim victory over inflation so it can go back to inflationary policies. In effect, an end to rate increases, subsequent rate cuts, and loosening monetary policy will eventually lead to more price inflation. In other words, as soon as the Fed declares victory, inflation wins.


Because rising prices are a symptom of monetary inflation. And monetary inflation is exactly what we will get when the central bank reverts to a looser monetary policy.

In fact, despite the rate hikes, the Fed hasn’t been nearly as aggressive in tightening monetary policy as you might think.

Jim Grant pointed out that the Chicago Fed’s Financial Conditions Index reveals financial conditions are still looser than average even after the Fed’s “short of zero to 60 in six seconds of rate increases.” As of the first week of December, the index stood at -0.46. A negative number indicates loose financial conditions.

This reinforces a point Schiff made in a post on X.

The Fed was far more aggressive when its goal was to raise the inflation rate up to 2% than it’s been to reduce the rate down to 2%. To raise the rate the Fed held interest rates at zero, the lowest rate in history. But to lower it the Fed stopped at a historically modest 5.5%.”

While recent CPI data may reflect a slowdown in rising prices and create a sense of optimism, the victory dance seems a bit premature.

401k IRA Rollover Free Report

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

CPI vs Rate Cuts: The Fed’s Mission Impossible

With a hot CPI report casting a shadow of doubt on the likelihood of a June interest rate cut, all eyes are on the Fed. But they’ve caught themselves in a “damned if they do, damned if they don’t” moment for the economy — and the news for gold is good regardless. 


The Educational Gap in Economics

It’s no secret that the American public is wildly ignorant of many issues that are central to the success of our nation. Just a generation ago it would have been unthinkable that less than half of the American population could recognize all three branches of government. America is in most cases far less educated about its government […]


Central Banks Are Buying the Gold Top

In investing, “Buy low, sell high” is among the most well-known sayings, and generally, it’s good advice. But with gold still holding near its historic all-time highs, central banks led by China are bucking the classic adage and smash-buying more, buying the top to fortify themselves against a global monetary and financial blow-up.


The Passive Investor Problem

When John Bogle died in 2019, people around the world mourned. Bogle created the Vanguard Group and made the index fund mainstream. Index funds are investment vehicles that invest in a class of investments as a whole, rather than trying to predict what specific stocks or securities will do best. So an investor could invest in an […]


Student Loan Inflation, Here it Goes Again

As the Democratic Party has shifted away from its traditional base of working-class and middle-class Americans, to an increased reliance on college professors, students, and highly educated but low-paid professions, such as social workers, a new policy has risen to prominence: student loan forgiveness. 


About The Author

Michael Maharrey is the managing editor of the SchiffGold blog, and the host of the Friday Gold Wrap Podcast and It's Your Dime interview series.
View all posts by

Comments are closed.

Call Now