Peter Smith
FOMC week is here, and the numbers tell an interesting story. US inflation just hit 2.12% according to Truflation data - that's down from last week and sitting well below the official government reading of 2.90%.
The Inflation Breakdown
With inflation creeping toward the Fed's 2% sweet spot, traders like Truflation are already weighing in on what this means for policy. Everyone's asking the same question: will we get the expected quarter-point rate cut, or is Powell about to throw us a curveball?
This year's been a wild ride for inflation. We've seen everything from a 1.22% low to a 3.04% high, and the latest 2.12% reading shows things are still cooling off. The recent move down was small but steady, suggesting price pressures aren't running away from us.
Here's what's driving the numbers:
- Education costs, clothing, and booze prices pushed things up slightly
- Most other categories stayed put
- The bigger picture shows we peaked above 3% earlier this year before sliding back down
What's Really at Stake This Week
Markets are basically betting the house on a 25 basis point cut. The logic seems simple enough - inflation's cooling, so the Fed should ease up. But here's where it gets tricky: there's almost a full percentage point gap between the Truflation number (2.12%) and what the government says (2.90%). That's not small change in Fed world.
The real question is whether Powell's team will trust the forward-looking alternative data or stick with the official numbers that always lag behind. It's a bigger decision than most people realize because it sets the tone for how they'll handle data going forward.
A rate cut would be rocket fuel for stocks, especially the growth and tech names that have been waiting for cheaper money. The dollar would probably take a hit, which means commodities and emerging market currencies could catch a bid. Bond yields would drop, making it cheaper for everyone from homebuyers to corporations to borrow money.
Peter Smith
