This morning’s CPI came in cooler than expected up 0.3% MoM vs 0.4% expected, with annual inflation at 3.0%. It’s still the hottest YoY print since January, but overall confirms inflation is easing again.
Gasoline drove most of the increase, rising 4.1%, while electricity and natural gas fell. Food prices barely moved at +0.2%, with only small upticks in bakery and beverage costs.Shelter continues to cool. Rent inflation dropped to 3.4% YoY, the lowest since 2021 and monthly rent growth was the smallest in more than two years. Shelter overall rose just 0.28% MoM, signaling that housing, one of the biggest drivers of sticky inflation, is finally loosening its grip.Core CPI rose just 0.2% MoM, bringing the annual rate down to 3.0%, its lowest since June. Airline fares and apparel climbed, but used cars, insurance, and communication costs all declined. “Supercore” services ex-shelter fell to 3.3%, the lowest since May, showing that inflation pressure in service-heavy areas like travel, insurance, and recreation is softening across the board.Now, the bigger story might be money supply because while inflation looks tamed on paper, the foundation for another wave might already be building underneath. Over the last few months, the U.S. money supply (M2) has started expanding again after nearly two years of contraction. That shift matters: when the Fed tightens, the money supply shrinks, slowing spending and credit but once it turns upward again, it signals liquidity is flowing back into the system.A rising money supply means more cash in the economy through government spending, credit growth, or Fed balance sheet moves and that liquidity eventually fuels asset prices and, later, demand-driven inflation. It doesn’t show up immediately in CPI, but it lags by several months. This is why markets are celebrating cooler inflation data now, but long-term investors are watching the re-acceleration in liquidity as a warning sign that today’s disinflation could become tomorrow’s reflation.Source: StockMarket.News
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