CPI Inflation Report: Fed Cutting Rates, Money Printing Next!

In today's video, we're covering the CPI inflation report. So here's the situation. Okay, first of all, I just want to say this to bring you up to speed. This CPI inflation report is for the month of September, and this was supposed to be released last week, but it got delayed until today because of the government shutdown. Anyways, for the month of September, CPI headline inflation and core inflation both came in at 3%. Okay, now with that being said, a very important question is how is this new inflation information going to affect Federal Reserve's decision next week about what they're going to do with interest rates? I'm going to show you the new odds of a rate cut happening next week, but I want you to be aware of this first. The Federal Reserve is trying to get inflation down to 2%, right? However, I mean, just think about it. Whether you're using headline inflation or if you're looking at core inflation, it doesn't matter which one you're looking at because both of them are well above the 2% target that they want to be at. And as you can see, the rates of inflation, they've bottomed in April, and we've basically been undoing the progress. We've been going backwards. However, even though the rate of inflation is worse right now compared to five months ago, I mean, the Federal Reserve is still most likely going to cut interest rates at their next meeting next week on October 29th, and this is their rationale. These are the two reasons why they're still going to cut. So the first thing is that they're saying that the inflation situation is still under control. They're saying that even though it's above their target, their 2% goal, they're saying that this situation is temporary, it's transitory. And the second reason is they're saying that an interest rate cut, it's necessary, it's needed to prevent further weakness in the labor markets. Now, I want you to take a look at the odds of what the Federal Reserve is going to do at their meeting next week. And this is according to the CME FedWatch tool. Before the inflation report was released this morning, there was a 98.3% chance that the Federal Reserve would cut interest rates by 0.25%, and a 1.7% chance that they would not cut interest rates. After the release of the CPI inflation report, here's how the odds have changed, not by much, a 96.7% chance that they're going to cut interest rates by 0.25%. So listen, when the Federal Reserve cuts interest rates by 0.25% next week, I'm telling you, trust me, it's not going to be a shocker to anybody. But you know what? People are going to be listening to the press conference. I mean, they're really going to be looking for clues, especially in their Q&A. They're going to be looking for clues about when the Federal Reserve is going to start printing massive amounts of money again, and whether they're going to cut interest rates at their next meeting in December. Okay, so let's take this one thing at a time. When the Federal Reserve prints money, which is, you know, of course, inflationary, they call that quantitative easing or balance sheet expansion. But the opposite of that is when the Federal Reserve believes that there's too much money in the system, they want to remove money from the system to slow down inflation, they call that quantitative tightening or balance sheet runoff. Okay, so right now, the Federal Reserve is tightening. Jay Powell was the chair of the Federal Reserve. He dropped hints in his last public appearance saying that he basically said that the tightening cycle is going to end pretty soon. JP Morgan originally forecasted that the tightening cycle would end early next year. But now they're moving that prediction up. They're saying that, well, their prediction, their new prediction is that the tightening cycle is going to end sooner than they thought. They're saying that the Federal Reserve may end the tightening cycle this month, and next week's meeting. And I'm telling you that this is huge news. Okay, but why? Because first, they stop the money tightening. And then what comes after that, they start the money printing. And this is what I've been saying since last year, they're going to print money like crazy, most likely in 2026. And that's, you know, that was my prediction back then, and it still stands. Moving on to the second point. It's pretty much a given that the Federal Reserve is going to cut interest rates by a quarter point next week, right? But how about the meeting in December? Are they going to cut interest rates again, at that meeting? Before the release of today's inflation report, there was a 91.8% chance of that happening. So in other words, a 91.8% chance that the Federal Reserve would cut interest rates by a quarter point next week, and then another quarter points at the December meeting. And that would bring the Fed Funds interest rate down from today's 4.25% to 3.75%. Now, after today's inflation report, here's how the expectations have changed. It's changed from a 91.8% chance to now 96.3%. So listen, that's how the CPI inflation report has impacted the Federal Reserve and their interest rate decisions for the remainder of the year. Now, back in September, President Trump said, I mean, you can read it for yourself, just out, no inflation. Essentially, President Trump said that inflation was rising at the rate of 0%. I mean, I don't know how else to interpret no inflation. However, of course, the CPI inflation report for September says that it's at 3%. But I just want to remind you that this is the inflation figure coming from the US government. If you're going to ask me personally what I think the real rate of inflation is, I would say it's around double that, whatever the government's reporting. And I want you to keep in mind that this is before the Federal Reserve cuts interest rates even further, and also prints a massive amount of money next year. But again, President Trump is saying that the rate of inflation is at 0%. However, I mean, you could tell me how you feel or what you're seeing, but many Americans are not seeing that 0% inflation rates. Now, I believe that most Americans believe that inflation is still ongoing. And I just want to say that even if you support President Trump, it doesn't mean that you have to agree with everything he says. It doesn't mean that you have to take his word for everything he says. For example, I have this cousin. I support him. I support my cousin. But sometimes, I just don't agree with everything he says. He said the other day that the Chicago Bears have the best defense in the NFL. And again, I support my cousin, but it doesn't mean that I have to believe everything that he says. 75% of Americans are reporting that their monthly household expenses have gone up by at least $100 since President Trump took office. And 40% of Americans are saying that their monthly household expenses have gone up by $500 or more since Trump took office. And as you can see, if you look at the details, it's not being heavily skewed by Democrats. The Republicans, Democrats, and Independents, they're giving similar responses that, yes, prices of everyday goods are still going up. And when asked about which expenses went up the most for you in the last year, the overwhelming number one response was the cost of groceries. Now, a good question that a lot of people are asking is, will the inflation situation get better or worse from here on out? I mean, you can let me know what you think, but here's what I think. The government is reporting what they believe is the rate of inflation is well above the target, right? The Federal Reserve keeps on saying that their goal is to get inflation down to a rate of 2%. And they keep on saying that they're going to get it down to 2%, but it's going to be another 18 to 24 months before they could get it down there. But I just want you to know what's been happening. The Federal Reserve, they keep on saying that, oh, we need another 18 to 24 months. They keep on saying 18 to 24 months. They've been saying that for the past four years. So I want to show you the latest example. And this is coming from Fed Governor Stephen Moran. Just take a look at this interview from a few days ago. So this was from October 15. OK, here's a forecast question. When are we going to get to 2% inflation? So 2% headline measured PCE. Headline PCE. That's the target, right? Yeah, I think probably let's say a year and a half from now or so, if I remember correctly, where my dots were. A year and a half from now. Yeah, approximately. And now I want to show you this video clip of the Federal Reserve's last press conference when a reporter actually called them out. They called out the Federal Reserve. They called out Jay Powell, chair of the Fed, saying that you keep on saying that you're going hit your inflation goal in two years, but it never happens. So are you at risk of losing your credibility? So please take a look. I'll make a follow up. Every year since 2015, the SEP has forecast that you would hit your target two years later. And this year, this SEP says you're going to hit your target two years later. 2% does not seem to be in sight. Does that suggest that the 2% target is not really achievable? And does this present any credibility problems for you in telling people that that's what you're going to do if you can never reach it? Well, I mean, you're right. It does say we're going to get to 2% inflation in 2028, at the end of 28. But that's literally how you put the projections together. You're writing down a rate path, which is designed to create over the course of the SEP timeframe, 2% inflation and maximum employment, too. So that's all that is. No one really knows where the economy will be in three years. But the nature of the exercise is to write down policy that you believe would return to the 2% goal at least by the end of the exercise. But listen, I want to end with this. This is how I see the situation. The Federal Reserve is cutting interest rates. And of course, that's inflationary, because it's bringing about an easier monetary policy. They're stopping the money tightening any day now. JP Morgan, as you saw, they're predicting that they're going to stop the tightening this month. And the Federal Reserve is going to print a massive amount of money. My expectation is that they're going to do that in 2026. And of course, that's inflationary. So my assessment is that the inflation situation is just going to get worse from here. You can call that a wild hunch of mine. But please let me know what you think. Thank you for the support. Please subscribe. Keep you up to date on this whole situation. Thank you so much. And I wish you a very nice day. Take care.