Latest Updates

• US CPI: August 2025 2025-09-11 08:30

  Inflation data for August pointed to a modest but broad-based pickup in price growth, with pressures showing up across both goods and services. The report highlighted a rebound in several volatile categories, while core measures continued to show steady gains that suggest price momentum has firmed again in recent months. Although the details were mixed, the overall picture reflects a shift away from the disinflationary trend earlier in the year and raises fresh questions about how durable underlying inflation pressures might be heading into the fall.

  CPI

  

  US CPI increased 0.4 MoM in August, the largest one-month increase since January and slightly ahead of expectations of a 0.3% MoM rise. All major segments of inflation increased last month, reflecting a continued moderate rise in prices to start Q3 2025. On an annual basis, CPI was up 2.9% YoY, accelerating from 2.7% YoY in July and the highest since January. A large part of this reacceleration in the headline inflation rates came from a rebound in the volatile components.

  

  • Food prices increased 0.5% MoM in August, the largest monthly increase since January 2023. This included a strong 0.6% MoM rise in the food at home index which was the largest monthly gain in almost three years. All six grocery components increased but the hot print was especially driven by a 1.6% MoM rise in fruit & vegetable prices (which was the largest since February 2022) and a 1.0% MoM rise in meats, poultry, fish & egg prices. The food away from home index also increased, up 0.3% MoM, pushed higher mainly by prices for full-service meals rising 0.4% MoM. On an annual basis, food prices are now up 3.2% YoY, the highest since October 2023.
  • The volatile energy component contributed with a rise of 0.7% MoM in August, bouncing back from a -1.1% MoM decline in July. Energy goods prices jumped 1.7% MoM, offsetting a small -0.2% MoM drop in energy services prices. Specifically, there was a 1.9% MoM rise in gas prices that pushed energy consumer prices higher as this subcomponent has the highest weight. However, on an annual basis, energy price growth is still benign, up just 0.2% YoY, thanks to weak energy commodity prices.

  Core CPI

  

  The core CPI components also saw a moderate gain in August, collectively rising 0.3% MoM for the second straight month. This was in line with expectations, but also the second highest monthly rise since January. The emerging trend suggests that inflationary pressures have picked up in Q3, advancing from the disinflationary trend in Q1 and Q2. Moderate price growth was visible across both goods and services categories, which were both up 0.3% MoM. The details, though, showed a more mixed view.

  

  • Core goods prices increased 0.3% MoM in August, the largest monthly print since January and the third straight moderate increase in a row. The subsegments in core goods saw uneven moves with the largest growth in apparel (+0.5% MoM), transportation goods (+0.5% MoM), alcohol (+0.6% MoM), and tobacco (+1.0% MoM). These were partially offset by declines or weak gains in medical care goods (-0.3% MoM), education & communication goods (-0.3% MoM), and household furnishings (+1.0% MoM).
  • While the goods segments were about even, with some weak and some strong, the more heavily weighted components related to autos posted strong gains: new vehicles (+0.3% MoM), used vehicles (+1.0% MoM), and auto parts & equipment (+0.6% MoM). While the rise in new vehicle prices was the smallest of the three, it was the largest increase in this subsegment so far this year.
  • Core services prices were up 0.3% MoM in August, slightly slower than the 0.4% MoM rise in July. Like the goods subsegments, there were mixed trends among the services subsegments. The heavily weighted shelter index increased 0.4% MoM, its largest rise since January, and was a major driver of the top-line services rise. Outside of that, transportation services (+1.0% MoM) saw a hot print due to the largest ever rise in motor vehicle maintenance prices (+2.4% MoM). These two hotter prints were offset by medical care services (-0.1% MoM), recreation services (-0.2% MoM), and education & communication services (+0.1% MoM).
  • This month’s inflation data appears to have been heavily affected by strong moves in subindexes related to autos and the shelter index. When excluding shelter and used cars from core CPI, the monthly increase was 0.2% MoM, in line with the smaller rises in Q1 and Q2.

  

  Looking at some broader trends, we can see where the inflationary pressures are coming from. The core goods segment has seen significant gains in the last few months with both the long-term and short-term views showing momentum gathering. Specifically, the 3-month annualized rate of core goods inflation jumped to 2.8% last month, after briefly dropping below zero in May. This is the highest short-term inflationary pressure in goods since mid-2023. The annual increase has also crept higher, rising to 1.5% YoY, the highest since May 2023. The decline in price growth in services has not been enough to offset the resurgence in goods inflation, and in fact, the disinflation in the short-term has bounced back in the last three months to a 3-month annualized rate of 3.9%.
• US CPI: July 2025 2025-08-12 08:30

  CPI

  

  US CPI posted a moderate monthly gain in July, rising 0.2% MoM, while the annual rate remained unchanged at 2.7% YoY compared to June. The data points were roughly in line with expectations, but the annual rate was slightly below the consensus estimate of 2.8% YoY. There were several segments pulling the index in either direction. The main deflationary force came from the energy segment, but that was offset by a moderate rise in non-energy goods and services prices. Let’s take a closer look at the volatile components:

  • Food CPI was flat on a monthly basis in July after posting gains of 0.3% MoM in both May and June. Prices for food at home dropped -0.1% MoM with only 2/6 grocery store subindexes rising. The decline was driven by lower cereals & bakery products (-0.2% MoM) and nonalcoholic beverages (-0.5% MoM). On the other hand, the segment for meats & eggs saw a slight 0.2% MoM increase. The index for food away from home increased 0.3% MoM with prices for full service meals up 0.5% MoM. Overall, food inflation is stable around 3% YoY, where its been since March.
  • Energy CPI was the major source of deflation in the July report as it dropped -1.1% MoM in July as a result of another sizeable drop in gasoline prices (-2.2% MoM). Gas prices have not risen like they usually do over the summer which translates to stronger seasonally adjusted declines in the CPI report (not seasonally adjusted, the gas index was down -0.5% MoM). Energy services saw a smaller decline at just -0.3% MoM and offset some of the larger decline in gasoline. On an annual basis, the energy segment is down 1.6% YoY, a smaller decline than was seen a few months ago.

  Core CPI

  

  The US core CPI increased 0.3% MoM in July, slightly ahead of the headline index but in line with expectations given by analyst forecasts. The annual rate saw a hotter shift as it ticked up 0.2 ppts to 3.1% YoY, larger than the acceleration to 3.0% YoY that was expected by analysts. Although, the upside surprise can be attributed more to rounding since the YoY rate to two decimals was 3.05%. The core inflation rate has now increased for two straight months and is at its highest since February. This month, core services prices saw the largest monthly gain since January and were the cause of the frothy gain in broader core prices. However, core goods prices also increased, pushing the annual increase to a two year high.

  • The core services segment increased 0.4% MoM in July, the strongest MoM rise since January. In this report, the shelter index was not the force behind a hot services reading as it was up just 0.2% MoM. Instead, significant gains in medical care services (+0.8% MoM) and transportation services (+0.8% MoM) drove the core services segment higher with the former seeing the largest monthly gain since September 2022. Transportation services was impacted by a 4.0% MoM increase in airline fares, the largest in over three years. Despite a relatively hot MoM print, the annual core services inflation remained at 3.6% YoY.
  • The core goods segment increased 0.2% MoM in July, matching the monthly pace seen in June. All of the core goods subsegments except for one increased in July with the largest increase seen in the household furnishings & supplies index (+0.7% MoM). Prices for vehicles were mixed with new vehicle prices unchanged on a monthly basis while used vehicle prices increased 0.5% MoM. Apparel (+0.1% MoM) and medical care goods (+0.1% MoM) prices both saw marginal increases. The trend in core goods prices has been a slow and steady uptrend, rather than a sharp, jagged spike in response to tariffs. The annual rate of growth of core goods prices sits at 1.2% YoY, up from 0.7% YoY in June and the highest since June 2023.

  

  Overall, the July CPI report does not provide the strong upside surprise that many analysts were expecting to see over the summer as tariffs started to work their way into the supply chains and to consumers. However, that does not mean that tariffs are not having any effect on prices at all. The reality is that firms have likely prevented a spike in prices by building inventories ahead of the implementation of the tariffs (that were also delayed a bit), allowing for a smoother transition to the new tariff reality. We should continue to see core goods price pressures rise through the end of the year and become a significant source of inflationary pressure by the end of the year.
• US CPI: June 2025 2025-07-15 08:30

  The June CPI report offered a mixed picture for inflation watchers. While the headline and core figures were largely in line with expectations, the details tell a more nuanced story. Beneath the surface, price pressures in key goods categories appear to be picking up, hinting at the early impact of rising tariffs. Energy and food costs have also re-accelerated, suggesting that the path back to 2% inflation may be bumpier than recent progress implies. For the Fed, this report doesn’t scream urgency, but it does reinforce the case for patience.

  CPI

  

  US CPI increased 0.3% MoM and 2.7% YoY in June, coming in line with analyst expectations, as the monthly rise in prices records the highest rate since January of this year. Additionally, the annual rate is now at a four-month high after easing to a four-year low in April. The hotter reading on overall prices was partly due to a reversal in the energy segment and another solid rise in food prices.

  • The energy segment increased 0.9% MoM in June, the highest monthly increase since January. Both energy goods and services were priced higher, up 1.0% MoM and 0.9% MoM, respectively. Gas prices finally found some of the summer seasonal hikes, up 1.0% MoM, and the electricity index also saw a 1.0% MoM increase. On an annual basis, the energy segment is still negative, at -0.8% YoY, but to the least extent since February.
  • Food prices increased by 0.3% MoM in June, matching the solid rise in May. Food at home was up 0.3% MoM with half of the six grocery segments rising (the other half declined). Fruits and vegetables posted their largest MoM gain since May 2023 at 0.9% MoM, and nonalcoholic beverages were up 1.4% MoM, the largest since July 2022. Food away from home was up 0.4% MoM with full service meal costs up 0.5% MoM. The food index ended Q2 up 3.0% YoY, matching the annual rate at the end of Q1. It’s likely we will continue to see food inflation rise as tariffs on food products start to hit grocery stores and restaurants.

  Core CPI

  

  The volatile, non-core categories appeared to be the main source of inflationary pressure in June. Core CPI was up just 0.2% MoM. The moderate monthly increase in core prices pushed the annual rate up a tick to 2.9% YoY, but both rates were below the consensus forecasts of 0.3% MoM and 3.0% YoY. Both core goods and services price growth continued their gradual cooling compared to the hotter prints in 2024, but price pressures are still slightly above where the Fed wants them to be, likely due to higher import costs from tariffs.

  • The core goods segment increased 0.2% MoM in June, the highest since February, pushing the annual rate to 0.7% YoY, the highest since July 2023. Some of the hotter segments included household furnishings & supplies (+1.0% MoM, largest since January 2022), recreation goods (+0.8% MoM), and apparel (+0.4% MoM). While these segments were hot, declines in new (-0.3% MoM) and used (-0.7% MoM) vehicle prices kept the broader goods index subdued. If we exclude used cars from the core goods segment (still including new cars), that special aggregate was up 0.3% MoM, or the largest since March 2023. Overall, there appears to be evidence that inflationary pressure in goods is rising and has been so far this year.

  

  • The core services segment increased 0.3% MoM, about where it has been trending throughout Q2 2025. These moderate increases suggest that services price pressures have receded from their worst, thanks to housing inflation entering a consistent cooling trend. The shelter segment was up just 0.2% MoM in June, and notably, its annual rate dropped to 3.8% YoY, the lowest since November 2021. Medical care services (+0.6% MoM) and other personal services (+0.6% MoM) were the main segments on the rise in June. On an annual basis, core services were up 3.6% YoY, matching the previous month’s rate, but services price pressures in the short-term have been consistently falling and are below three percent.

  The details in the June CPI report are very important to consider. The headline CPI and core CPI rates both appeared to be a bit cooler-than-expected compared to expectations, but the positive surprise relied on some key categories, shelter, new and used vehicles, and energy, to keep inflation subdued in June. The BLS’s special aggregate which excludes used cars and shelter from core CPI increased 0.3% MoM in June, which is the highest monthly increase since January. I believe that this tick up in MoM inflation is tariffs finally making their way into the data, and I think we will continue to see similar tariff impacts over the summer, especially if tariff rates go back up on August 1st.
• US CPI: May 2025 2025-06-11 08:30

  The key US inflation indexes saw softer-than-expected increases in May across the board, as the effects of tariffs on consumer prices appear to be tame so far. Both headline and core inflation came in below consensus estimates, reinforcing the view that inflationary momentum is cooling. Core goods prices remain weak, shelter inflation continues to moderate, and energy prices are still in deflation on a YoY basis. Short-term inflation dynamics are softening in a way that suggests the Fed should adopt a more dovish stance, especially as growth concerns rise and markets begin pricing in renewed policy easing.

  Headline CPI

  

  The headline CPI index increased 0.1% MoM and 2.4% YoY in May, slightly ahead of the 2.3% YoY gain in April. However, the May moves were both below the consensus projections of 0.2% MoM and 2.5% YoY. Energy continues to be a major source of deflation for the all items index, and the major goods and services categories elsewhere saw inflation that only somewhat offset it. Here is how the two volatile segments trended in May:

  • The Food index increased 0.3% MoM in May, reversing the -0.1% MoM drop seen in April. Price gains were even across the food at home and the food away from home categories which both increased 0.3% MoM. Egg prices continue to fall, down another -2.7% MoM, and were offset by a 1.1% MoM increase in cereals & bakery product prices, which is the largest monthly increase in that subindex since November 2022. Food inflation continued a steady upward trend, up 2.9% YoY in May, which is noticeably higher than the 2.0-2.2% YoY range that was seen during 2024.
  • The Energy index reversed the 0.7% MoM gain in April, falling -1.0% MoM in May. Gas price increases to start the summer were unusually weak, and the index fell -2.6% MoM after seasonal adjustment (-0.7% MoM before seasonal adjustment). The natural gas index fell -1.0% MoM, and the electricity index increased 0.9% MoM. There is an interesting divergence within energy in the annual rates; energy goods prices are down -11.6% YoY while energy services prices are actually up 6.8% YoY (the largest YoY gain since March 2023). However, the deflation in goods (especially gasoline) is stronger and keeps the Energy index in deflation at -3.3% YoY.

  Core CPI

  

  To go along with the soft headline CPI print, the core CPI index (excluding food and energy) saw a small gain of 0.1% MoM in May. At one decimal, this monthly rate looks like the 0.1% MoM increase in March, but at two decimals, the May rate looks a bit hotter. Specifically, core CPI increased 0.13% MoM in May, about 7 bps higher than the 0.06% MoM increase in March. Regardless, the low MoM rate and the unchanged annual rate of 2.8% YoY were below expectations of increases of 0.3% MoM and 2.9% YoY. In that context, the core inflation print looks especially soft. Here is how the key segments looked:

  • Core goods prices were unchanged in May, preserving a trend of soft goods inflation prints even though some may have expected there to be a reaction to three months of tariffs. Declines in used cars and trucks (-0.5% MoM) and new vehicles (-0.3% MoM) were the main drag on goods inflation along with a -0.4% MoM drop in apparel prices. Other indexes posted more moderate gains like medical care goods (+0.6% MoM), household goods (+0.3% MoM), and recreational goods (+0.4% MoM).
  • Core services inflation remained subdued at just 0.2% MoM in May. The increase was the 3rd weakest since the inflationary 2021-2022 period began, only faster than the March 2025 and June 2024 prints. Most indexes saw negligible to no change in prices: medical care services (+0.2% MoM), transportation services (-0.2% MoM), recreation services (-0.1% MoM), education & communication services (+0.1% MoM). The main reason for any gain in core services was shelter. Despite the soft print, the annual rate remained unchanged at 3.6% YoY.
  • The Shelter index was up 0.3% MoM with owners’ equivalent rent up 0.3% MoM, the softest print since February. On an annual basis, the Shelter index was up 3.9% YoY which is the smallest since November 2021. The large weight of this index means that it still contributes 1.4 ppts to the headline CPI YoY rate.
  • The motor vehicle insurance index has been in focus over the last year due to its rapid rise, and in May, it saw another sizeable gain of 0.7% MoM. The annual rate has come down due to base effects, but it remains elevated at 7.0% YoY, contributing about 20 bps to the headline annual inflation rate.

  In totality, the May CPI report is further evidence that inflationary pressures in the US economy are continuing to fizzle out due to economic weakness that has developed in the first few months of the year. Specifically, weaker consumer confidence and uncertainty in business outlooks appear to be translating into a more tangible weakness visible in prices. Importantly, pricing pressures from tariffs have largely not filtered into consumer prices so far. Short-term core goods inflation (measured by the 3-month annualized rate) actually turned negative in May at -0.3% MoM after being as high as 1.9% in Q1 2025. The trend in core services is similar, as the short-term measure for that segment is down to 2.3% in May, the lowest since March 2021.

  Market Reaction

  

  The market’s reaction to soft inflation in May was very dovish as investors became abruptly more bullish on equities and bonds. S&P futures jumped about 0.4% as soon as the report was released, shifting what was going to be a slight decline at open to a slight gain or flat. The reaction in yields was even more significant and a welcome sight to bond traders who have been struggling to cope with US debt fears. The 2-year yield dropped by as much as -10 bps right after the report was released, and it now sits below 4% after jumping past that level last week. The 10-year yield also dropped by about -6 bps, after it had been trending around 4.5% this morning. The soft inflation report could help the bond market shake the fiscal policy fears that have kept long-end interest rates high since Trump’s inauguration.

  

  Instead, investors can shift back their focus to the Fed, which has been on the sidelines so far this year as it attempts to gauge how Trump’s policies will impact the inflation outlook. FOMC members have not been shy in showing that they believe high tariff rates will be at least a transitory upside risk to inflation, but as more and more evidence comes against that view, they might have to change their views. Soft prints like today’s CPI report should allow the Fed to push the inflation mandate closer to the back burner so that it can get back to managing the potential downside risks to the economy and the employment mandate.

  

  I believe that the Fed has been a bit too hawkish over the last few months, and that it should be close to cutting rates by 25 bps in this month’s meeting. The inflation data, especially the data from the last three months, suggests that the gradual weakening of consumption is becoming a slightly firmer decline. With that being said, if the Fed does move away from its hawkish viewpoint in the June meeting and SEP update, US equities can continue to rally from the tumultuous Q1 2025 and retest the all-time highs of early February.
• US CPI: April 2025 2025-05-13 08:30

  The April CPI report delivered another soft reading on inflation, reinforcing the growing evidence that price pressures in the US economy have meaningfully eased. Over the last three months, short-term measures of inflation have decelerated to levels consistent with the Fed’s 2% target. While markets remain cautious about the timing of rate cuts, the data increasingly supports the view that the Fed is closer to easing than many currently assume.

  Headline Inflation

  

  US CPI increased 0.2% MoM and 2.3% YoY in April. Both growth rates were below expectations of 0.3% MoM and 2.4% YoY increases. The annual increase is now the lowest since February 2021 as it dips below the 2.4% YoY increase seen in September 2024. While recent disinflation has a lot to do with the movement in energy prices, the CPI results over the last two months are very strong evidence that inflationary pressures are fading from the US economy. Here’s how the volatile components moved this month:

  

  • Food prices saw their first monthly decline since November 2020, dropping -0.1% MoM in April. The decline was driven by a lower food at home segment, which saw the largest drop since September 2020 at -0.4% MoM. Five of the six grocery indexes fell on the month including a -1.6% MoM drop in meats, poultry, fish, and eggs that was heavily affected by consumer egg prices down -12.7% MoM. Offsetting some of the decline in grocery prices was a 0.4% MoM increase in food away from home which included a 0.6% MoM increase in full service meals.
  • Energy prices saw a slight recovery in April, rising 0.7% MoM after the -2.4% MoM drop in March. The results in this segment were split between energy goods and energy services. Energy goods prices fell -0.2% MoM with the gasoline index down -0.1% MoM. The energy services segment increased 1.5% MoM as the electricity index increased 0.8% MoM and gas utility costs were up 3.7% MoM. Overall, consumers’ energy costs are remaining low due to weaker commodity prices.

  Core Inflation

  

  US core CPI inflation increased at a moderate pace of 0.2% MoM in April, keeping the annual rate unchanged at 2.8% YoY. While the monthly rate was slightly below expectations of a 0.3% MoM increase, the annual rate was in line with expectations. The core segments featured another month of cool goods price movement, while services prices saw moderate growth.

  • The core goods CPI segment increased just 0.1% MoM in April after a slight decline in March. Declines were seen in the apparel (-0.2% MoM) and transportation commodities (-0.2% MoM) segments, led by used vehicle prices falling -0.4% MoM and new vehicle prices remaining unchanged. Outside of these segments, other core indexes posted moderate gains: household furnishings (+0.2% MoM), medical care goods (+0.4% MoM), and recreation goods (+0.4% MoM). On an annual basis, core good inflation is just 0.1% YoY, the lowest since December 2023.
  • Within household furnishings, two indexes stick out. The appliance index was up 0.8% MoM in April, the largest increase since March 2022, and the furniture & bedding index jumped 1.5% MoM. The larger gains in these indexes could have been driven by tariff-related pressures since China and Canada are typical suppliers of these goods and their parts in the US.
  • The core services CPI segment increased 0.3% MoM in April, returning to a more moderate increase after the 0.1% MoM increase in March. The movements of the services segments were mixed. Medical care services saw the largest monthly gain of 0.5%, but that was offset by cooler readings elsewhere: transportation services (+0.1% MoM), recreation services (-0.3% MoM), and education & communication services (-0.2% MoM). Core services CPI is now up just 3.6% YoY, the lowest since November 2021.
  • Since most services segments were mixed, the broad move in core services was dominated by the heavily-weighted shelter index which increased 0.3% MoM in April. Both the rent of shelter index and the owners’ equivalent rent index increased 0.4% MoM, in line with the moderate increases we had seen throughout 2024. On an annual basis, owners’ equivalent rent inflation is the weakest in over three years at 4.3% YoY.

  

  • Another notable result was the airline index seeing another sizeable decline in April. On a monthly basis, the index fell -2.8% MoM after a steep -5.3% MoM drop in March. The trend reflects how unstable tariff policy has started to impact tourism in the US, especially in international travel. Over the last year, airline fares are down -7.9% YoY, the weakest since December 2023.
  • Additionally, a measure of core inflation that excludes the abnormalities in housing and vehicle prices continues to trend low. The special aggregate that removes energy, food, shelter, and used vehicles increased 0.2% MoM and is up just 1.8% YoY in April, where it also was in March.

  

  Another month of weak CPI readings means that measures of short-term inflation pressures have receded quickly. The annualized rate of quarterly CPI inflation has fallen to just 1.6% in April, the lowest since August 2024 and before that, the lowest since the pandemic. Similarly, the annualized quarterly rate for core CPI inflation has fallen to 2.1%, just slightly above the 2% target. If we were to adjust this short-term CPI rate to map onto a PCE rate, it would be around 1.8-1.9%, below the Fed’s target. In the chart above, I average three different core CPI rates that include information on inflationary pressures across different time horizons. That measure has fallen to its lowest since July 2024, around the time the Fed considered and eventually moved forward with the 50 bps rate cut.
• US CPI: March 2025 2025-04-10 08:30

  In the middle of an uncertain macro environment dominated by headlines about tariffs, the March CPI report provided a more optimistic view on the inflation situation. Soft monthly increases in headline and core inflation driven by declines in several key segments, including energy, may provide the Fed with enough room to cut rates in May if they so choose.

  Headline Inflation

  

  For the first time since the pandemic, US CPI saw a monthly decline, coming in at -0.1% MoM in March. With the negative monthly print, the annual rate slowed to 2.4% YoY, the lowest since September 2024, and well below expectations of a slowdown to 2.6% YoY (from 2.8% YoY in February). The negative headline monthly rate was largely a result of energy prices which saw a strong decline in March.

  

  • The energy CPI component fell -2.4% MoM and -3.3% YoY, down from the -0.2% YoY increase in February. The monthly decline in energy was the largest since May 2023. The drop in gas prices in March drove the decline as that index fell -6.3% MoM (largest decline since December 2022). Its large weight offset rises in the natural gas index (+3.6% MoM) and electricity (+0.9% MoM).
  • Food prices continued their uptrend, posting a moderately strong increase of 0.4% MoM and pushing the annual rate up to 3.0% YoY which is the largest annual increase since October 2023. Food at home prices were up 0.5% MoM with meats up 1.1% MoM and dairy up 1.0% MoM. Food away from home increased 0.4% MoM with prices for full service meals up 0.6% MoM. The trend in food prices which is typically categorized as volatile remains in a steady uptrend. Tariffs are only going to accelerate the trend.

  Core Inflation

  

  While the decline in energy prices played a major role in the decline in the headline index, the core inflation segment did come in softer than expected at 0.1% MoM, a monthly rate not seen since May and June of 2024. That soft print helped push core CPI inflation below the three percent threshold to 2.8% YoY in March, the lowest in four years. The disinflation was a result of cool trends in both goods and services that pointed to a broad decline in prices.

  

  • The core goods segment declined -0.1% MoM in March, the first decline since August 2024. A major subsegment driving the decline was a -0.2% MoM move in transportation commodities that featured a -0.7% MoM decline in used vehicle prices. This offset a slight 0.1% MoM rise in new vehicle prices. There were declines in two other goods segments, medical goods (-1.1% MoM) and recreation goods (-0.3% MoM), and a flat MoM reading in household furnishings & supplies.
  • The core services segment was only up 0.1% MoM, the first increase of that size since August 2021. Another sizeable decline in transportation services played a major role in the soft core print. It fell -1.4% MoM in March, the largest MoM decline since May 2020, after an -0.8% MoM decline in February. Within that index, motor vehicle insurance prices fell -0.8% MoM (largest decline since October 2021) and airfares fell -5.3% MoM (largest decline since September 2021).

  

  • The shelter CPI component increased just 0.2% MoM, the slowest since June 2024, and the annual increase cooled to 4.0% YoY, the lowest since November 2021. The cool reading is a bit deceptive. The subindex was affected by a -3.5% MoM decline in lodging away from home, the largest drop in over three years, while the rent of primary index index increased 0.3% MoM and owners’ equivalent rent was up 0.4% MoM.
  • If we remove the shelter and used car moves from the core CPI reading, prices were unchanged in the month of March for the first time since May 2024. On an annual basis, this special aggregate decelerated from 2.2% YoY in February to 1.8% YoY in March, the lowest in four years.

  The soft March CPI print is evidence that weaker discretionary spending is flowing through into prices. Food and housing prices looked like the hottest segments this month while there were declines in discretionary segments like recreation goods and airfare and notable soft prints in recreation services (+0.1% MoM) and household furnishings (0.0% MoM). This is the kind of report that the Fed was looking for in its fight against inflation as it is evidence of demand-driven disinflation. Instead, over the last two years there was a steady strength in the economy that kept inflation sticky.

  There is a major caveat to this report in that it is the last CPI reading before the major reciprocal tariffs went into effect and probably too early of a reading to see any impact from the tariffs placed on Mexican and Canadian imports. The impact from the North American tariffs was always going to be limited because most of these imports from the US’s neighbors are for intermediate goods like energy, lumber, and machinery. Autos is the main exception here and new vehicle prices did increase 0.1% MoM, the largest so far in 2025.
• US CPI: February 2025 2025-03-12 08:30

  Indicator	February	Forecast	January
  CPI	0.2% MoM (2.8% YoY)	0.3% MoM (2.9% YoY)	0.5% MoM (3.0% YoY)
  Core CPI	0.2% MoM (3.1% YoY)	0.3% MoM (3.2% YoY)	0.4% MoM (3.3% YoY)
  Energy	0.2% MoM (-0.2% YoY)	-	1.1% MoM (1.0% YoY)
  Food	0.2% MoM (2.6% YoY)	-	0.4% MoM (2.5% YoY)
  Core Goods	0.2% MoM (-0.1% YoY)	-	0.3% MoM (-0.1% YoY)
  Core Services	0.3% MoM (4.1% YoY)	-	0.5% MoM (4.3% YoY)

  

  The major CPI inflation rates surprised to the downside across the board as February’s report looks like solid evidence that softness in consumer demand has allowed disinflation to continue. The headline CPI index increased 0.2% MoM and 2.8% YoY, falling short of expectations of increases of 0.3% MoM and 2.9% YoY. The core CPI index was also up 0.2% MoM and the annual rate was 3.1% YoY, both also short of expectations of 0.3% MoM and 3.2% YoY increases. However, softness in the volatile categories and declines in a few major categories were the main reason for cooler inflation.

  Food and Energy

  Both the volatile components of energy were under control in February and saw monthly rates that were lower than all months in Q4 2024.

  

  • Food prices were only up 0.2% MoM in February with food at home flat on the month and food away from home up 0.4% MoM. The flat monthly rate for grocery prices was the lowest since May 2024 and an important reversal from the gradual acceleration in MoM rates since late summer 2024. This softer reading did not include the recent decline in egg prices as the egg index was reported to have been up 10.4% MoM and 58.8% YoY in February. The decline in this index in March should mean that next month’s food at home print will be soft as well.
  • Energy prices posted a soft 0.2% MoM increase after seeing larger increases in December and January. The annual rate is still slightly negative at -0.2% YoY meaning that we are still getting a slight deflationary impact from energy on the headline annual rate. Gas prices fell -1.0% MoM as the late winter rise was lower than usual. On the other hand, natural gas prices were up 2.5% MoM and electricity prices grew 1.0% MoM.

  Core Inflation

  The soft 0.2% MoM core inflation print allowed for a decline in the annual rate by -0.2 ppts to 3.1% YoY in February. This is the first deceleration in the annual rate since September as inflationary pressures had been making a come back in the second half of 2024. From January, both core goods and core services indexes cooled, but there was some divergence in the details:

  • Core goods prices were up 0.2% MoM in February, and the annual rate was unchanged at -0.1% YoY which means that in general goods inflation is still making a slight negative contribution. A large reason for the coolness in February was a -0.2% MoM decline in new vehicle prices, the category with the highest weight. This offset moderately high increases elsewhere including used cars up 0.9% MoM, apparel up 0.6% MoM, and tobacco & smoking products up 0.6% MoM.

  

  • Core services prices increased 0.3% MoM in February after a hotter 0.5% MoM increase in January. This caused the annual rate to fall to 4.1% YoY, down from 4.3% YoY previously and the lowest since January 2022. The coolness in services prices was caused by an -0.8% MoM decline in transportation services, reversing from the hot 1.8% MoM increase in January, as a result of airline fares falling -4.0% MoM. Some smaller services indexes were a bit hotter like recreation services (+1.0% MoM) and other personal services (+0.9% MoM).

  

  • The shelter index was up 0.3% MoM in February, down from 0.5% MoM in January, but still a moderate increase. Both rent and owners’ equivalent rent were up 0.3% MoM. Despite the moderate increases in shelter costs, the annual rate eased roughly -0.2 ppts to 4.2% YoY, the lowest since December 2021.

  The details of the inflation data suggest that price changes were more mixed across categories, but subindexes with heavier weights posted softer readings and, thus, showed in the headline indexes more. Specifically, the new car index was down -0.1% MoM, and the transportation services index was down -0.8% MoM. Together, these subcomponents actually account for over 10% of CPI and cover a narrow subsection of consumer prices covering travel. A softer February reading was also helped by the shelter component, with a weight of over 35%, moderating to just 0.3% MoM.
• US CPI: January 2025 2025-02-12 08:30
  

  US CPI crashed in with a hot January reading this morning, beating analyst expectations across the board. CPI inflation was 0.5% MoM and 3.0% YoY in January, hotter than 0.3% MoM and 2.9% YoY expected, and core CPI inflation was 0.4% MoM and 3.3% YoY, also hotter than 0.3% MoM and 3.1% YoY expected. This was the largest monthly increase in the headline index since August 2023 and the first time the annual rate was at or above 3.0% since June 2024. In general, these numbers are strong evidence against any disinflationary narrative.

  Food and Energy

  

  The hot headline inflationary read was a result of food and energy inflation flaring up to start the new year.

  • The food index increased 0.4% MoM, the largest since February 2023, as the food at home index saw a strong increase of 0.5% MoM, the largest since October 2022. The driving upward force was a 1.9% MoM increase in meats, poultry, fish and eggs that, when digging deeper, was affected by a 15.2% MoM increase in egg prices (largest since June 2015). The BLS notes that the surge in egg prices accounted for about 2/3rds of the food at home increase. This is the first time we are seeing a huge impact from the bird flu pandemic which has affected over 23 million birds, including commercial egg laying birds, in the last 30 days.
  • The energy index saw a strong increase for the second month in a row at 1.1% MoM (after 2.4% MoM in December). On an annual basis, the index is no longer a deflationary force as it is up 1.0% YoY in January vs -0.5% YoY in December. Gains in natural gas prices (+1.8% MoM) and gasoline prices (+1.8% MoM) drove the index higher. Energy prices could continue to see upward pressure from tariffs (specifically on Canadian oil) and rising natural gas prices from outsized inventory draws.

  Core Inflation

  

  In January, we did not only see hot readings in the volatile food and energy indexes but also in core inflation segments. Core CPI’s 0.4% MoM increase was above expectations and was the highest since March 2024.

  • Non-energy goods prices posted a 0.3% MoM increase as they rebound from a year of cooler months. The monthly increase was actually the highest since May 2023 and followed six months which included 2 negative readings and 2 flat readings. Quite simply, a rebound in goods prices is being made possible by a persistent strength in consumer demand that has been accentuated by rate cuts at the end of 2024.
  • Just like in energy, we are seeing used vehicle prices flip from being a deflationary segment to a slight inflationary segment after a hot 2.2% MoM increase in January, the largest since May 2023. The annual rate flipped from -3.3% YoY in December to 1.0% in January and, with transport having a strong weight, the segment will put new upward pressure on core inflation.
  • The other segment putting upward pressure on goods prices was medical care commodities, up 1.2% MoM as prescription drug prices increased 2.5% MoM. Outside of that, though, other goods indexes were cooler like apparel (-1.4% MoM) and household furnishings (-0.2% MoM).
  • The services index increase of 0.5% MoM reverses some of the hope that we were going to see a solid disinflationary trend in services prices. Thanks to base effects, there was a slowdown in the annual rate from 4.4% YoY in December to 4.3% YoY in January, however, the short-term price pressures will likely see more of the attention.
  • Starting with some good news, the shelter index increased 0.4% MoM, and the annual rate eased from 4.6% YoY in December to 4.4% YoY in January, the lowest since December 2021. There does appear to be a gradual disinflationary trend in shelter, and that is good news.
  • With shelter coming in relatively cool, other services segments fueled the rise in core services prices. Transportation services, up 1.8% MoM (the largest since September 2022), was one of the hot segments in services as strong increases in car rental costs (+1.7% MoM), motor vehicle insurance (+2.0% MoM), motor vehicle fees (+2.6% MoM), and airline fares (+1.2%) played a part.
  • Also within services, we see the effects of Netflix raising its prices. Recreation services prices were up 1.4% MoM with cable, satellite, and live streaming service (+1.8% MoM) seeing the largest monthly increase since August 2005.

  

  Overall, it’s hard to see any evidence in the January CPI data that there is a broad disinflationary trend that is moving inflation “sustainably” towards the Fed’s 2% target. Several categories came in with very hot monthly readings which overlooked the key disinflationary trend in the shelter index. What’s worse is these numbers represent prices before any tariffs were implemented which means we still have to wait for that factor to play out.

  January 2025 Seasonal Adjustment Update

  

  The January 2025 release also included an adjustment of the seasonal factor which caused some revisions to the 2024 monthly rates. In the chart above, the blue line represents data as of the December 2024 report, and the green line represents data as of today’s report, after the new seasonal adjustment update. The revisions did not change the directionality of any readings but instead just flattened out the trend over the year. Specifically, the low June rate saw a minor upward revision and the three Q4 readings were all revised slightly lower. This results in a slightly lower seasonally adjusted annual rate of 3.214% YoY in December vs the old estimate of 3.248% YoY, a very marginal downward revision that won’t have any policy implications.
• US CPI: December 2024 2025-01-15 08:30

  Data Point	December	Forecast	November
  CPI	0.4% MoM, 2.9% YoY	0.3% MoM, 2.9% YoY	0.3% MoM, 2.7% YoY
  Core CPI	0.2% MoM, 3.2% YoY	0.2% MoM, 3.3% YoY	0.3% MoM, 3.3% YoY
  Core Goods CPI	0.1% MoM, -0.5% YoY	-	0.3% MoM, -0.6% YoY
  Core Services CPI	0.3% MoM, 4.4% YoY	-	0.3% MoM, 4.6% YoY

  US CPI increased 0.4% MoM and 2.9% YoY in December, a small upside surprise on the monthly rate but an annual rate that was in line with expectations and the highest since July. The core CPI inflation reading was on the cooler side with an in-line monthly increase of 0.2% MoM and a huge downside surprise in the annual rate to 3.2% YoY (vs 3.3% YoY expected). The market took the cue from the core CPI YoY miss and reacted bullishly to what it perceived as a signal that price pressures are cooler than previously thought.

  

  Food and Energy

  The fastest monthly increase in the CPI since March was largely impacted by energy prices bouncing back from weakness in Q3 and Q4. Energy CPI jumped 2.6% MoM which is the fastest since August 2023. Gas prices jumped 8.3% MoM and fuel oil prices were up 3.9% MoM, both one-year highs for monthly rates, but on an annual basis, both were still negative (as was energy CPI down -0.5% YoY). The other non-core segment, food, maintained a solid pace of growth at 0.3% MoM and 2.5% YoY, up from 2.4% YoY in November. Both food at home and food away from home saw 0.3% MoM gains as food price growth picked up gradually throughout the year. The annual pace of food inflation is now at the highest point since January.

  Core CPI

  The core inflation reading is what is driving the market today as the report noted a smaller 0.2% MoM rate in December, the slowest since July, and an annual rate of 3.2% YoY, down from 3.3% YoY and the lowest since August. The disinflationary move was important because it reestablishes a disinflation trend that had faded in Q3 and early Q4 and sets up the rate for more deceleration in 2025. Here are some key core CPI details:

  

  • Core goods CPI was up 0.1% MoM but still down on an annual basis by -0.5%. This is the largest annual rate since February but still negative. New vehicle (+0.5% MoM) and used vehicle (+1.2% MoM) monthly price growth were the main price pressures in December as the transportation commodities (less fuel) index increased 0.7% MoM. However, this was offset by softer readings elsewhere: household furnishings & supplies (-0.2% MoM), apparel (+0.1% MoM), medical care goods (0.0% MoM), and recreation goods (-0.5% MoM).
  • Core services CPI saw its third straight increase of 0.3% MoM but the annual rate decelerated to 4.4% YoY, the lowest since February 2022. This was caused by a similar slowdown in the shelter index which was up 0.3% MoM and 4.4% YoY, the slowest annual rate since January 2022. Other services categories were a mix of slow and moderate increases with medical care services up 0.2% MoM, recreation services up 0.4% MoM, education & communications services up 0.2% MoM, and transportation services up 0.5% MoM.
  • The transportation services segment is notably up 7.3% YoY (though that is down from 8.2% YoY in November) and now becoming a segment to watch. It includes motor vehicle insurance prices which is up 11.3% YoY, and airline fares which increased 3.9% MoM in December and are now up 7.9% YoY, the fastest annual rate since March 2023.
  • Supercore inflation, services less rent of shelter, increased 0.4% MoM and decelerated to 4.0% YoY, the lowest since February. This watered-down snapshot of the service sector is gradually closing in on the general services segment as the shelter component continues to cool.
  • Another core measure of inflation that excludes food, energy, shelter, and used vehicles increased just 0.2% MoM and clocked in at 2.4% YoY which was unchanged from its reading in November.

  

  Broadly, the story of the December data is that the hotter readings of price pressures in October and November look to have cooled. The short-term core CPI 3Mo3M annualized rate had risen to 3.7% in November from 2.1% in August, and with the cool December reading, that measure eased to 3.3%. The annualized monthly reading for December actually comes out to 2.7%, so a few more months like that and short-term price pressures will drop back to where they were in the first half of 2024 when disinflation was intact.