CPI Inflation Report - Interest Rate Cuts Confirmed! #inflation #usstockmarket

the CPI inflation report was released today and I believe a particular headline perfectly encapsulates the current situation inflation has now fallen to its lowest level since February 2021 a significant Milestone this drop in inflation strongly signals that the Federal Reserve is likely to cut interest rates in just 7 days now I'd like to walk you through the details starting with the official Consumer Price Index CPI report which was published on Wednesday September 11th covering data for August the report reveals that inflation has dropped to 2.5% marking the lowest rate we've seen in over 3 years additionally core inflation which excludes food and energy stands at 3.2% here's where things get interesting while inflation has been steadily declining the labor market is also showing signs of weakening the Federal Reserve will need to decide at their next meeting whether to cut interest rates or Hold Steady following the CPI release this morning Market expectations shifted as tracked by the CME fed watch tool the FED meeting scheduled for September 18th now has an 85% likelihood of a 0.25% interest rate cut with a 15% chance of a more aggressive 0.5% cut personally I've been forecasting a 0.25% cut and it seems that's where the data is pointing now I want to be clear and direct predicting what the Federal Reserve will do is quite straightforward at this point given the key variables we have inflation and the labor market first has inflation been falling according to the FED Zone reports the answer is unequivocally yes while some may argue that these numbers are manipulated or unreliable that's not our Focus today secondly has the labor market been weakening again the answer is yes so based on these factors it's almost certain that the FED will begin cutting interest rates next week and this is just the beginning my projection based on both the fed's long-term Outlook and current economic conditions is that rate cuts will continue for the next year and a half possibly even 2 years these changes will have broad implications influencing everything from inflation the Dollar's value and the stock market to housing prices mortgage rates savings accounts credit cards auto loans and student loans additionally bond yields and the overall economy will feel the impact as will the labor market itself this shift in monetary policy commonly referred to as the FED pivot is incredibly important and will shape the financial landscape significantly by 2025 will likely be witnessing major Transformations across many sectors as a result of these decisions there's so much I want to dive into on each of these topics but we'll need to tackle them separately in upcoming videos for now let me show you what the market is predicting for the fed's actions in November it's widely expected that the Federal Reserve will continue cutting rates next month the same goes for December where the market anticipates additional rate Cuts moreover the FED has projected further interest rate reductions into to 2025 and 2026 that's the broader Outlook now let's focus on the key takeaways from the latest inflation report year-over-year CPI inflation stands at 2.5% marking headline inflation core CPI inflation which excludes volatile items like food and energy is currently at 3.2% energy inflation is down by 4.0% food inflation has risen by 2.1% Services inflation is up by 4.99% % and shelter inflation is at 5.2% next let's take a look at some notable statements from Federal Reserve officials if you're skeptical of the market expectations consider the words of the FED members themselves Austin gby president of the Chicago fed recently stated that inflation is falling sharply while unemployment is rising faster he clearly indicated that we're not just looking at one or two rate Cuts soon but multiple Cuts over the next 12 months to clarify he's not limiting the cuts to a 12-month window he's simply pointing out the direction they're considering in that period meanwhile rapael bosk president of the Atlanta fed emphasized that waiting until inflation fully hits 2% before easing restrictions would risk significant disruptions to the labor market potentially causing undue hardship his statement is available for everyone to view on the Atlanta feds website additionally just two days ago the New York Federal Reserve released its latest report on microeconomic data IT projects household income to grow by by 3.1% over the next year while household spending is expected to rise by 5.0% the problem here is clear when spending outpaces income growth it can spell trouble this could explain why us consumer stress is rising the report also shows an increasing likelihood of Americans missing debt payments over the next 3 months I want to stress that I'm not trying to sound alarmist I'm simply relaying the data the Federal Reserve has provided they aren't forecasting smooth sailing head and I believe it's important to be transparent about that finally just for fun I need to touch on a story that's been gaining a lot of attention recently so inflation has been steadily falling right now the media is starting to churn out stories about the fear of deflation for those unfamiliar deflation is when prices actually begin to decrease currently we're still dealing with inflation but since the rate of inflation is dropping what we're experiencing is called disinflation deflation however refers to an actual decline in prices now why am I bringing this up because if the media and the Federal Reserve start to claim that we're facing a deflationary threat the so-called solution to that problem is for the Federal Reserve to accelerate money printing that's right they would essentially aim to reinl the economy by pushing more money into circulation to bring inflation back up the narrative would likely be framed as oh no if prices on essential Goods like groceries begin to drop that's going to hurt GDP so the answer in their eyes would be to print money faster and Spike inflation supposedly for the good of the people the reality however is that the Federal Reserve and the government simply cannot and will not tolerate deflation they can't allow it to happen it's not in their playbook but what's almost comical is that they might actually use this Potential deflationary Threat as an excuse to ramp up money printing I'm just calling it out in advance now before I wrap up let me share my opinion on how I think this will all unfold the rate Cuts will likely begin in September and after that we can expect to see The Return of quantitative easing QE when monetary policy shifts like that inflation will inevitably accelerate again it's just a matter of how quickly and when we'll start to feel it in my view we won't see an immediate reacceleration of inflation as there tends to be a lag with these kinds of measures so I don't expect significant changes in the inflation rate for the rest of this year especially since the Year is already winding down but I predict that by the second half of 2025 inflation will start to pick up and by 202 6 it'll be in full swing I'd love to hear your thoughts on all of this so please leave a comment below don't forget to subscribe if you haven't already and thank you for your continued support I hope you have a wonderful day take care