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The economy and FED are at an inflection point. There are FED governors who see more interest rate cuts from the next few meetings, one sees a pause, and Jerome Powell, the head of the FED, says we’ll see.
The inflation numbers this week were considered tame and were near consensus estimates by surveyed economists. Yesterday, the Consumer Price Index (CPI) came in at an annual rate of 2.4% which was .1% higher than forecasts. Excluding the more volatile food and energy components the annual rate came in at 3.3%. This rate was .1% below August and was the lowest since February 2021. Muddying the picture was an unexpected increase in weekly unemployment claims of 258,000, the highest since August 2023.
Today’s producer price index (PPI) number came in at an annual rate of 1.8 % unchanged from the previous month and .1% below surveyed economist expectations of a .1% monthly gain. Excluding the more volatile food and energy components the PPI was up .2% for the month.
Both the CPI and PPI continue to be above the 2% FED target. Why are they lowering interest rates with inflation above their target and the employment picture looking okay? As I wrote in the beginning of this update, an inflection point. The FED’s feeling is that the employment picture will deteriorate over the next year. Hey, 23,000 FED staff members can’t be wrong!
Gold and silver have reacted positively to these numbers. There was an opportunity to buy on the dip earlier this week and then over the last two days buying on the upward momentum. I have been advocating either one in my writings for quite a while.
Until next time…
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