CPI Forecast?

sams1985 | Mar 12, 2023 | 781 posts since 2022

I know the recent bank crisis has dominated lately but does anyone have any guidance on the upcoming CPI? I just put in a buy order for some 4.8% 60 month non-brokered CD's on Fidelity to keep dollar cost averaging in.

The bank crisis and subsequent "bailout" will probably be another variable thrown into the mix- just more uncertainty. Who knows how it will affect upcoming rate hikes and inflation.

Market futures are turning green and and the 5 year treasury will likely rebound tomorrow as well. Any thoughts?

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Answers

JeffinEasternFL | Mar 12, 2023 | 744 posts since 2020

short term deposit rates will rise quickly but, again, banks remember 2007,8,9 to well - and do not want to be holding money that's paying north of 5% to depositors for long term when the fiscal nonsense of the last 2~ years comes to boil. I expect long term rates may actually drop a bit near term before continuing a slow slog up (but not on par with FFR increases) with 3~ FFR increases. This administration will have so much spin on the banks and "corporate greed" that the CPI will not get the headlines it should as Janet Yellen keeps yellin about nothing..

sams1985 | Mar 13, 2023 | 781 posts since 2022

GOLDMAN: “In light of recent stress in the banking system, we no longer expect the #FOMC to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March.”

Wow. Does anyone actually believe the Fed would do this? Inflation will come roaring back.

Steve58 | Mar 13, 2023 | 459 posts since 2018

Yes. Since it is a Democrat administration, the Fed will do what they can to keep him out of a financial apocalypse going into an election year. Thus they will not overdo it more then they have to.

Remember when Obama was president, they kept rates near 0 for 8 years even though things were mostly better. Then right before the election, they raised rates a quarter point as I remember. Then started raising regularly under trump administration, until the pandemic declaration.

Sounds like the banking problem is fast rising rates which are causing a lot of losses on bond holdings. Runs on the banks are making the banks sell these assets at a large loss. So I can see Fed holding off rate increases.

anonlol | Mar 17, 2023 | 178 posts since 2016

Not true, fake news, in late 2019 before people were even thinking about a pandemic Trump was busting Powells chops to start lowering interest rates calling him to the white house, in a good economy because we couldn't complete with foreign countries and he was tring to keep propping up the stock market with artificial lower interest rates the same thing he complained about when he ran in 2016 regarding Obama that it's "not fare for savers Obama playing with funny money" In March of 2020 due to the stock market crash from the pandemic the Fed went from approx 1.25 percent what was left in interest to 0 at that time overnight. Europe just raised 1/2 point, if he does not raise a 1/4 during a strong job market and continuing inflation then it will look bad like there is a serious problem with the economy, when it's merely some greedy banks that decided to pay .0001 interest the past few years while purchasing long term treasures for better interest like 1% instead of short term ones as well low interest mortgages which they are now stuck with which no one wants as rates are near 5%. As the tech sector was struggling due to over hiring during the pandemic while things return to normal, SVB was one of the first hit with a short fall on deposits vs withdrawls and the inability to liquidate those long term low yield assets.

Steve58 | Mar 17, 2023 | 459 posts since 2018

So why did the Fed keep interest rates near 0 for 8 years until 2016 election? That was absolutely ludicrous. The economy was not flailing under Obama, it just was never robust. The FED kept Obama afloat for 8 years.

The Fed started to raising them to 2.4% under Trump up until 2019. They started lowring them because of the trade war with China. Yes Trump complained. So what? He was pissed that the Fed had no problem keeping the rates at zero for 8 years under Obama but enjoyed raising them for him. Which was my main point.

w00d00w | Mar 13, 2023 | 360 posts since 2012

Cleveland Fed Nowcasting has Feb CPI at 0.54% month-over-month and 6.21% year-over-year
https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting

John19 | Mar 13, 2023 | 395 posts since 2022

I bought a small amount of brokered CDs last week that already got rate screwed and bought 28 day treasuries, so my buying spree is done this for this round. I'm kind of worried about Schwab and Ally, maybe I'll move things around a bit. Should be very interesting to see what happens tmrw with the SVB fallout and then the CPI report coming out later in the week. Seems like brokered CDs could disappear in a hurry with a soft report like Nov. I want to keep as much dry powder as possible. I've spent about half of what I plan to spend on long-term CDs so far.

daylilly | Mar 13, 2023 | 19 posts since 2022

John19, Why are you worried about Schwab and Ally?

John19 | Mar 13, 2023 | 395 posts since 2022

Schwab stock dropped hard and Ally health ratings seem kinda iffy.

daylilly | Mar 14, 2023 | 19 posts since 2022

Thanks for responding!

John19 | Mar 13, 2023 | 395 posts since 2022

Treasuries are dropping like crazy to start the day!

JeffinEasternFL | Mar 13, 2023 | 744 posts since 2020

Not surprised at Treas drop and early volatility elsewhere in various equity and debt markets; let's see how the last hour of the trading day looks? clam and trending? Or still nervous with sell offs elsewhere and flight to safety..it will be entertaining at the least!

alan1 | Mar 13, 2023 | 877 posts since 2015

a question for sams1985: You wrote that you're getting non-brokered CDs from Fidelity at 4.8% for a 60-month term. There are numerous banks that are named "Fidelity" or have names that include "Fidelity". Which one is offering non-brokered 5-year CDs at 4.8%? Thanks.

sams1985 | Mar 13, 2023 | 781 posts since 2022

Alan1,

Sorry typo-i meant brokered not non-brokered from Fidelity Investments.

John19 | Mar 13, 2023 | 395 posts since 2022

All of Discover's brokered CDs vanished this morning.

Steve58 | Mar 13, 2023 | 459 posts since 2018

Since I bought I bonds last October, I try to track CPI-U more diligently. It appeared Inflation peaked last June when CPI-U printed 296.311. For the next 6 months through December numbers, the CPI-U showed that inflation moderated quite significantly to 0.31% (yearly rate for 6 months). But then we saw the big print for January numbers reported last month. That put inflation to 1.65% (yearly rate for 7 months). That really rallied long term savings rates and caused the market to tumble. The top 5 year brokered CDs went from 3.8% to 4.8% through Friday. On Friday the top 5 year brokered CDs dropped 0.05%.

If inflation goes back to the average level for February from 2012-19 (0.417% month over month), then CPI-U would be at 300.418 which would put us at 2.08% (yearly rate for last 8 months). If that were to happen then I think savings rates will drop and market will rally.

If we see a number like January's (0.800% month over month), then inflation is not going away as fast as I had hoped and savings rates will increase and market will tumble.

Of course that is assuming no damage from the bank failures going on. Not sure how that effects savings rates near term, but if Friday is any clue, and there continues to be fallout, then long term rates will fall fast (10 year treasury dropped around 6% Friday).

Steve58 | Mar 14, 2023 | 459 posts since 2018

CPI-U at 0.417% month over month is the key pivot point for tomorrow.

sams1985 | Mar 14, 2023 | 781 posts since 2022

CPI out, seems like everyone in spinning it every which way to fit whatever narrative they're pushing...markets bouncing, treasuries bouncing, 25 point hike back on table. Can someone dumb it down for the rest of us?

Steve58 | Mar 14, 2023 | 459 posts since 2018

The question that everyone wants answered is when is inflation going to subside back to 2% so that the FED could stop raising interest rates. July through December, CPI-U numbers looked like we might get back to 2% annual inflation. Market rallied to start the new year and long term CDs dropped to around 3.7%. Then January CPI-U came out very hot (0.800% month over month), and those two trends reversed setting us up for today's February CPI-U.

Getting back to normal would have been 0.417% month over month or lower in my estimation. It came in at 0.558% month over month, so hot but not as bad as January. So the down trend we saw at the end of 2022 has not been confirmed from these last two months data points. So interest rates will likely rise and the market will be looking for next months number before rallying. I think the fed will raise rates 0.25% next week.

None of this takes into account bank failure aspects of the economy.

I think inflation will be going back to normal faster than most are expecting, so I am focused on buying more long term CDs for my ladders and saving the short term for later.

Right now the last eight months inflation at annualized rate is 2.29%. If we see the next 4 months with average (2012-19) month over month inflation numbers (0.445%, 0.304%, 0.255%, 0.154%) then the yearly inflation number announced in July will be 2.71%.

If the next four CPI-U numbers are double those average (2012-19) month over month inflation numbers (0.891%, 0.607%, 0.510%, 0.307%), then the yearly inflation number announced in July will be 3.90%. Not bad, but not the fed target.

Steve

JeffinEasternFL | Mar 14, 2023 | 744 posts since 2020

So will Biden call it "slow disinflation" ?

jjflyman | Mar 17, 2023 | 17 posts since 2018

Please pardon my ignorance on this, but did you say you bought non-brokered CD through Fidelity? I have a self directed IRA and a standard brokerage account with Fidelity. How can I buy non-brokered CDs? Am I missing something? Thanks for any answers!

alan1 | Mar 17, 2023 | 877 posts since 2015

This question was posed to sams1985 on March 13, supra.
sams1985 answered:

Alan1,

Sorry typo-i meant brokered not non-brokered from Fidelity Investments.

jjflyman | Mar 17, 2023 | 17 posts since 2018

OK, sorry I missed that. Thanks for the response!

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