Last Tuesday at 8:30am, the Bureau of Labor Statistics reported the largest single month decline in the Consumer Price Index — one of our most important measures of inflation — since April of 2020. President Trump immediately came on TV boasting about success in bringing prices down.
But a mere 90 minutes later, Kevin Warsh gave his first testimony as new Fed Chairman in front of Congress, saying effectively: “negative CPI doesn’t mean s***”. What gives? Who’s right, Trump or Warsh? Are we winning the battle against inflation, or has it not yet begun? And more importantly for the markets, which version of reality is the Fed reacting to?
I’m going to explain how it’s even possible to get a negative inflation print when day-to-day American lives are more expensive than ever, walk you through what the Fed is actually watching, and make the case for why markets are vulnerable here as we ramp up towards next week’s Fed meeting.
If you learned anything about inflation in school, you probably l…
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