CPI and National Security since 9/11

SPEAKER_1 (0:02)

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Paul Sweeney (0:27)

CPI coming up in just a few minutes. Really instrumental on how the Fed is going to move going forward. Tani Fukui joins us here, Senior Director of Economic Market Strategy at MetLife Investment Management located in the bustling financial hub of Whippany, New Jersey. Tani, there really is a town in Jersey called Whippany. It's a great place.

Tani, thanks for joining us here. What are you looking for in a CPI? How do you think the Fed's going to deal with the CPI?

Tani Fukui (0:57)

Yeah, so it looks like it will come in at least at 0.2%. If you start looking at what the pricing was in terms of Fed funds pricing, as well as you're looking at the betting markets, Cal-Shea and Polymarket, we've seen a big jump in the last 24 hours about that rate that inflation is going to come in a little bit high. So given that, if you get something like 0.3%, that's a fairly balanced 0.3% on core, I always look at the core inflation, you can pretty much see that the Fed is going to have to start, is going to have to do a hike in September.

Now if it's something like airfare or one or two idiosyncratic things, then perhaps there's something to argue about there. But generally speaking, there's a pretty low bar for the Fed to hike at this point.

Paul Sweeney (1:49)

This is where we are in the world, Lisa, where we have an undergraduate, a person with an undergraduate degree from the Wharton School of Business, pretty good.

Masters from Columbia, okay. PhD, International and Macroeconomics from UCLA, whatever that is, good. Quoting the betting markets, Cal-Shee and that kind of stuff. That's where we are in the world of global Wall Street financial analysis. I never had that when I was doing it.

Tani Fukui (2:13)

It matters.

SPEAKER_1 (2:13)

I mean, it seems that there's-

Paul Sweeney (2:15)

It's crowdsourcing real-time information. I know it's a total thing now.

Lisa (2:19)

How big do you think that is?

Tani Fukui (2:21)

Yeah, I mean, it is actually- You know, it's a question of is, you know, and I don't know if there's any kind of leak, but that's happened in the past, right? And that's-

And perhaps it's just, especially in the Fed Fund's futures markets, just folks trying to get ahead of what they expect to happen- have happened in- among the- at the FOMC. But you know, we don't know what other information there is. And that's one way of seeing what there might be out there.

Lisa (2:47)

In the two minutes we have before we get to the data, I want to take a step back and go back to yesterday's PPI report. Looking- are we looking at a temporary energy driven inflation bump, or is this the beginning of kind of a broader re-acceleration in inflation? What's your take on it?

Tani Fukui (3:02)

I mean, I think that you have to- when you- when you're in the context of the Fed and in the context of inflation, I think you have to take PPI with a great deal of great- large grain of salt. There's only so much correlation between the two.

And there's a lot of margin effects that are happening there. Where the Fed- the companies can actually absorb certain margins, wait a certain amount of time until- until they think consumers can actually handle it, before they actually pass those prices on. So I don't think that- I think that you have to be really careful before you start interpreting that as-

as a Fed signal, per se. But clearly there's a- you know, this is a- this is a yield story where a lot of the- you know, a lot of the high- the long end of the curve, in my view, is driven by two things, more so than the- than the debt, which one is the energy story, as you said, and the other one is market uncertainty about what Warsh wants to do. And those are things that are driving a lot of the Fed- of the long end pricing.

Paul Sweeney (4:04)

All right, folks, this is what you want to do right now. And you're sitting at your terminal, go ECO Go, and it pulls up all this stuff you need to see. And again, Core CPI, month-on-month, the headline consensus is 0.4 percent. Core, 0.2 percent. I guess we're going to focus on that one.