FEBRUARY 13, 2025 – The January report came in at 3.0%, just above the top end of my estimate at 2.7%-2.9%. The 3-month annualized inflation rate is 2.6%. The 6-month annualized inflation rate is 2.1%. These figures are below the annualized rate (3.0%) and thus indicate the annual CPI should decline slightly. In fact, the data is predicting a reading of 2.6% next month. Inflation is at its highest at the beginning of the year. So, I think it will remain near 3.0%. I have seen some indicators that show companies started spending significantly right after the Election. This should result in what I call TrumpFlation. When everyone is building and investing and acquiring, inflation must go up. The only thing that will keep the annualized figure from soaring is the first four months of 2024 also had high inflation figures.
As a side note, the 8-month streak of monthly CPI being at 0.20% or lower has ended.
The market has the Fed Funds Rate priced at 4.3%-4.4%. It was recently cut to 4.75%. The Fed doesn’t have much catching up to do. Til next month.
Shalom,
The Mann