Speaker 0: Us headline CPI inflation has been coming down relatively consistently since it peaked in June 2022 at around 9% now into the 3 to 4% territory. It's been a great ride yet. The path ahead will be much bumpier for those following the headline year over year percent change.

Speaker 0: The June data was the last headline inflation rate to benefit from easy 2022 comparisons. By contrast, the July data to be released in mid August is likely to bounce upward and stay there for another month again. This is all due to what we know happened back in the summer of 2022 and it tells us nothing about inflation's path forward.

Speaker 0: These anomalies are due to what economists call base effects since old data gets equal weight to new data in year over year comparisons.

Speaker 0: Market participants however know that more recent data is much more valuable than year old data to strip out the base effects. Market participants will be paying close attention to the month over month numbers averaging this volatile data over the past 3 to 6 months to smooth it out for the last six months, the month over month headline rate has been trending at just over 0.25% or a touch over 3% annualized

Speaker 0: if that path is maintained a big, if the headline rate will be very close to 3% by year in 2023.

Speaker 0: Of course, the Shelter challenge core inflation rate is likely to remain above the headline rate well into the future which will make fed decision making all the more difficult and uncertain. Should the fed push rates higher? Just because shelter inflation is a problem. When most everything else is much improved,

Speaker 0: the inflation path is settled around 3%. Should the fed push folks out of work and the economy into recession just to get to 2% inflation. These are hard questions and big debates are to come that will keep market participants on pins and needles.