Goldilocks, the Bears & Today's CPI

Like the rest of us, Goldilocks prefers cold rather than hot inflation. Today's CPI report for December was lukewarm on a y/y basis. But on a three-month basis it was nice and cold, just the way Goldie likes it.  The bears probably aren't happy with today's numbers because they are predicting that inflation will remain hot forcing the Fed to continue hiking rates, driving stock and bond prices lower. We are sticking with our forecast that the headline PCED measure of consumer prices will continue to cool off to 3%-4% this year, and start 2024 closer to the bottom end of that range.

On a y/y basis, the headline and core CPI inflation rates fell to 6.5% and 5.7% during December, down from last year's peaks of 9.1% in June and 6.6% in September. Inflation is moderating but remains elevated. The good news is that over the past three months through December, at a seasonally adjusted annual rate, they were down to 0.0% and 2.2%.