It was a nice dream while it lasted, the hope that the Fed might cut rates a half-point this month, bringing down interest rates on cars, homes, and credit cards — and maybe even bringing some private-sector job growth back to the economy.
Alas. That no longer looks so likely.
The Bureau of Labor Statistics (BLS) reported early Wednesday that the core consumer price index (CPI) — excluding more volatile food and energy costs — increased 0.3% from July. That's the most in four months and up 3.2% from a year ago. Housing costs, which include mortgages and rents, were “the main factor” in July's increase, according to BLS.
Housing costs are always a lagging economic indicator since mortgage rates generally change slowly and homes (or apartment moves) aren't exactly everyday purchases. What those costs indicate with today's news is that Bidenflation isn't done with us yet.
When July's inflation report came out in early August slightly under expectations, that gave Wall Street — and everybody else — hope that there might be a half-point rate cut. With this August report, we might consider ourselves lucky to get a quarter-point worth of relief.
Zero Hedge reminds us that "That was the 51st straight month of [month-over-month] increases in Core CPI and a new record high."
When a business makes bad decisions, red ink tends to provide a corrective effect. When government makes bad decisions, it tends to throw more of other people's money at the problem — the problem it created — to quiet down entrenched special interests who aren't about to let their gravy train derail. The whole point of the Biden-Harris trifecta of massive spending/regulatory bills — Inflation Reduction Act, Infrastructure Act, and American Recovery Act — created a gravy train feeding frenzy and a crippling regulatory load on the productive remnant of the private sector.
The relief we've enjoyed from inflation over the last year or so is only partly due to the high interest rates that have crippled private-sector job creation and disfigured the housing market. Much of the thanks is due to Beijing's epic mismanagement of China's economy.
"What, wut?" I can almost hear you ask.
Communist China has a serious problem with deflation, which is an even more stubborn problem than inflation. Beijing is trying to stimulate the Chinese economy by flooding global markets with inexpensive exports. That's what they have to do to keep the factories humming — and people employed and spending their money — to avoid a '90s Japan-style deflationary spiral.
Currently, China's most important export isn't cheap consumer goods; it's disinflation. That's helping to keep a lid on Bidenlfation...
...but China can't export suburban homes, city condos, or apartment buildings. The prices on those still reflect the epic mismanagement we've enjoyed these last four years right here at home.
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