Constance Hunter Talks Core CPI

Constance Hunter · Economist Intelligence Unit

Shelter inflation at 0.3% monthly annualizes to about 3.3%, above the Fed's target, and energy costs are passing into services.

Hunter reads the report's shelter component at 0.3% month over month, which she annualizes to about 3.3%, higher than the Fed's desired level. She points to transportation services as evidence that energy costs are still being passed through to the services economy, so the price pressure is not confined to goods.

“We look at shelter of 0.3 month over month. Again, that annualizes out to about a 3.3% rate, so higher than the fed's desired level. But look at transportation services, we are still passing through energy costs to the services economy.”at 2:17

Damian Sassower · Bloomberg Intelligence

Few sectors saw monthly prices fall in October, so inflationary pressures are still present.

Sassower says that across the economy, few sectors showed month-over-month price declines in October. From that breadth he concludes that inflationary pressures are still active, which supports his view that the Fed's hiking stance is understandable even though only a couple of hikes are priced through next year.

“on the whole, I mean, we haven't seen many sectors, you know, actually seeing inflation come down a month over month in October. So, you know, yeah, we still are seeing inflationary pressures.”at 6:01

Constance Hunter · Economist Intelligence Unit

Midterm election outcome likely slows the AI data-center buildout, cutting supply and lifting AI prices.

Hunter says AI prices are a concern and that the outcome of the election will bring some slowdown in the data-center build-out. Less supply against unchanged demand means higher prices. She frames this as a detail outside the BLS release, so the link to the consumer price data is her own inference rather than something the report shows.

“AI prices are a concern, and the upshot of the election is that there's gonna be some slowdown in the build out. Right. So less supply”at 2:40

Damian Sassower · Bloomberg Intelligence

Rising US food prices are a bad sign for emerging-market inflation pressures.

Sassower says food and energy are the two components that matter most for emerging markets. US food prices rose 0.5% month over month, and he treats that as a signal of what is happening in emerging economies, which he calls not very good. Energy prices are also still up to 7% year over year, so both components point to pressure abroad.

“the two components that matter for emerging markets are food and energy. And if you look at month over month rate rise in food, ... 0.5% here in The US, if that's any indication of what's going on in emerging markets, and that's not very good.”at 3:39

Constance Hunter · Economist Intelligence Unit

Warsh's Fed is concerned about everyday price increases and has already hiked once, with another hike signalled.

Hunter disagrees with Tom Keene's suggestion that the Fed's inflation view differs from households' experience. She argues the Fed under Chair Warsh has already hiked once and has said it will hike again, and that Warsh is worried because prices are rising for everyday Americans. The argument rests on the Fed's stated policy path and her reading of its motives.

“Well, I'm not sure that that's true. I think that that [chairman Warsh] has presided over a fed that hiked once that is that is said they're going to hike another time. I think that that Warsh is concerned about the fact that for everyday Americans, prices are going up.”at 5:41