Inflation RED HOT! Rates WAY UP! Relief On The Way?

By Jay Voorhees

October 13, 2022 2 min read

Inflation RED HOT! Rates WAY UP! Relief On The Way

Today’s inflation report (Consumer Price Index/CPI) came in much hotter than expected and rates shot through the roof in response.

BUT – as Barry Habib (of MBS Highway fame) has been explaining again and again – this was expected – and should not be alarming.

In addition, Mr. Habib carefully explains WHY future inflation reports will likely be much lower and why “relief” is on the way!

In the chart at the bottom of this blog (“borrowed” from Habib’s commentary today) under “WHEN WILL INFLATION PEAK,” Habib shows the monthly inflation readings going back to June of 2021.

Habib explains that today’s inflation readings are comparisons to the same month from the last year.

Hence, the lower the reading we saw last year for a given month, the more likely it is that we will have a high reading for the same month this year.

For example, September of 2021 had a low CPI report of 0.3% – and that made it much more likely that the September of 2022 report (released today) would be very high.

And that was the case, and that is precisely what Habib warned us about – numerous times.

But – if you look at the chart below again, you can see that October of 2021 had a relatively high reading of 0.6%.

So, when the October of 2022 CPI report is released on November 10th, it will likely be LOWER than expected, and the markets will likely breathe a huge sigh of relief – just like Habib has been predicting.

In addition, if you listen to Jeff Snider’s Eurodollar University podcast, you will hear him point out over and over how inventory is building up, microchip prices are plummeting, shipping costs are crashing, and commodity prices are coming down. So, these are additional reasons why inflation readings will come down.

The Fed’s next meeting is November 2nd though (before the next CPI report comes out), so market watchers expect the Fed to push rates up again in response to the reports from this week.

SILVER LINING? Rents make up 25% of CPI, and they were up 7.5% year over year. And rising rents are a huge reason to buy a house, as housing payments are fixed while rents are not. So, this is another reminder for fence-sitting homebuyers.