The Inflation Crash

CPI came out this morning a bit lighter than expected and it’s clear the inflation crash is in process. As I have posted many time now, this is headline CPI, CPI minus gas and used cars, and then what’s left over. I’m focused on the left over.

As you can see, we are falling fast now from 6% down to 4%. And most of what is left over is Shelter, which is lagging behind real life. If you take out Shelter from my right hand inflation number is running at 1.3% over the last 12 months.

Bottom line is inflation will continue to move in the right direction. The issue is what happens to asset prices and the labor market. Those two things may be more important to the Fed than CPI now.