Peter Smith
US inflation just hit 2.01% - practically kissing the Federal Reserve's 2% target and creating the biggest policy headache in months. The Truflation index shows we're way below the official 2.90% that government data claims, suggesting prices are cooling faster than anyone in Washington wants to admit.
What the Charts Are Screaming
Market watcher Truflation is already connecting the dots: slowing inflation plus a wobbly job market equals one thing - rate cuts are coming, and they might come hard.
The past year tells a wild story. We saw inflation rocket past 3% in early 2025, then crash to 1.22% by March - talk about whiplash. Since then, it's been bouncing between 1.8% and 2.4%, basically camping out right where the Fed wants it. Now at 2.01%, we're in that sweet spot that screams "mission accomplished" to central bankers. The technical pattern shows a classic peak-and-fall followed by sideways action - exactly what you see before major policy shifts.
Why Everything's Cooling Off
Three big forces are driving this decline:
- Job Market Reality Check: Hiring's slowing down and wage growth is moderating, which takes the heat off consumer spending
- Goods Getting Cheaper: Supply chains are back to normal and commodity prices have pulled back, giving consumers a break
- Fed's Medicine Working: Those aggressive rate hikes from 2022-2024 are finally doing their job, cooling credit, housing, and spending across the board
With inflation basically at target, markets are pricing in two or more Fed cuts before we hit 2026. If unemployment keeps trending up, we could see even deeper cuts. The Fed's walking a tightrope here - cut too fast and inflation roars back, hold too tight and you risk crushing an already shaky economy.
Peter Smith
