Assessing the Path: Goods and Shelter Inflation and the Fed's Pause Decision

Goods and shelter progress enough for a pause, cuts will require improvement in ex-housing services:

A third straight 0.2% m/m core CPI print would meet many Fed officials’ criterion to consider a pause, at least based on progress on the inflation mandate.

Indeed, at a Q&A during a 13 July speech, Governor Waller (one of the more hawkish-leaning FOMC participants) said that two more “good” CPI prints could suggest stopping hikes.

July comprised one, and we think August will comprise two. While this outcome is likely to help justify a pause, we think the Fed will need to see more progress on the non-housing services inflation front in order to entertain rate cuts.

To wit, Powell said “some further progress here [in non-housing services inflation] will be essential to restoring price stability.”

 

✕