Hey guys, it's Ashley New inflation data for the United States Just came in this morning and inflation has fallen to 4.9 which is the lowest level since April 2021. The incredibly encouraging thing in the inflation data is that all key indicators are falling at the same time and this is excellent news for the US economy. It is not surprising because this was obvious for several months already, but the stock market is looking very surprised this morning as I'm recording this video with stocks bouncing on the news. The truth is I don't think the stock market is actually seeing quite how good this data is because if it did, things would be looking a heck of a lot better.

Right at the top of the inflation report, you can see that food inflation has fallen to 7.7 for the second month. On the road, the food inflation is flat month a month. This is very good news because only in January food inflation was stubbornly sitting at 10.1 percent, so we are seeing a very substantial drop again. and this is going to help those on low wages, which is ultimately really important for people underpinning many of the jobs in manufacturing.

Many of the jobs that are propelling the US economy. food at home fell 0.2 percent month a month. A second fall in a row, and the annual rate is now sitting at just 7.1 year on year. Then we have energy, and for some inexplicable reason, energy overall went up 0.6 percent month a month and is only down 5.1 percent year on year.

I Say inexplicably? But of course we all know why energy is not falling anywhere near as much as it should be. And the answer is greed. The energy companies that were milking covered then raking record profits quarter after quarter after Russia's invasion of Ukraine are now realizing that the gravy train is over. But because energy companies operate as cartels and are in cahoots with the government who does exactly nothing about it Energy Prices are proving Mighty resilient for no good good reason whatsoever.

Here is the price data of Brent crude oil over the last year. Deep statistical analysis of this chart shows that it is going down and the price of oil is now at about 30 percent lower than at this point last year. But gas at the pump according to inflation data is only 12 percent lower than 12 months ago. In both 2021 and 2022, oil and gas groups catapulted the S P 500's energy sector into being the Market's best performer, highlighted by a 50 jump in value last year.

But the good times? They don't last. The energy sector is now the S P 500's biggest Lac guard down five percent so far, even though the overall index has climbed eight percent. Paradoxically, the companies themselves, especially the sector's largest players, remain absolutely flush with cash. And because they have so much cash, Big Oil is paying Hefty dividends to their investors.

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Natural gas is four times cheaper than at this time last year, so about 75 down, but the price to customers according to the CPI is only down two percent. An electricity is up eight point four percent year on year despite everything happening with the commodity prices. So with energy, there are two important takeaways. One, the energy companies are filthy and the government is absolutely pathetic for not standing up for consumers when there is an organized price racket going on.

while energy companies are posting record profits and posting record dividends. But the really important point is that even though U.S energy companies are more corrupt than Russian police, this sort of Racket just can't go on forever. They'll try to extend it, but push will come to shove and the prices will have to normalize and come down. And this is good for inflation.

Because energy is now building up this overdue downward price action that should have already happened, but will now happen at some point in the future, it is delayed. and that means that the energy part of the CPI should continue pushing the overall numbers down for longer going into 2024. And if you've seen me talk about this before, you'll remember the Trans reputation has a big lag relationship with energy, and we're now seeing this come through in the CPI data as well. Transportation is sitting at 11, which is very high still.

but for the first time during this long inflation Spike we have now seen a negative month-on-month movement. There is still a long way to go before This number looks good. 11 is high, a bit like what happened with food late on last year, but the green shoots are now finally beginning to come through. And then we have shelter.

Shelter Came in at 8.2 percent last time around and is now at 8.1 percent, which is surprising surprising that it's coming down at all. Shelter is essentially carrying the rest of inflation upwards with it, because Shelter is about one-third of the total index and it lags the price movements in rent and in-house prices. If you didn't count Shelter in the index, the overall inflation number for the month of April would be at 3.3 Quite a big difference, right? And because rent prices and house prices exploded in the last two years, Shelter is now playing catch-up but we know that rent price inflation is now on the way down. You can see the data in the Zampa report, and we can also see that the FED House price index has had the biggest fall since this data began being collected 60 years ago.

So long term shelter is heading down, although it will probably continue sitting artificially high and keeping the overall rate of inflation elevated throughout the summer. So every single important core metric of inflation is looking great is going down. even food has stopped being stubborn and is moving down significantly. And the big question is, how does this translate into the economy? Well, the next meeting in the Federal Open Market Committee is happening on June 13 and 14th.

So we are going to have one more inflation read before the FED decides what to do because the main inflation date of this month is coming in the morning of June the 13th the first day of that next meeting. and when that data for May comes in, we should continue seeing all of these Trends develop again, Food should look better, energy should push down, etc, etc. These things things are already happening and we know they're coming. so the FED will be sitting there on an interest rate of 5.25 after the recent hike, while inflation is dipping to the mid four percent range and continuing to Trend down, and every data point is saying that every key inflation indicator will continue moving down at the same time, the lending environment is tight, businesses are putting off investment because they don't want to take on expensive financing Big Tech is laying off employees.

But remember, the German Power and the rest of the FMC committee have been busy giving speeches saying that the rate will definitely no way whatsoever come down this year and possibly all the way through next year in March Four members of this committee said that they think interest rates at the end of 2024 will be higher than they are today, and only one out of the 18 members thought that there was any chance that rates would actually drop in 2023. that one person predicted one 0.2 five percent drop before the end of the year. So you can see that these guys are unanimous. There is no chance rates are going down just like there was no chance that rates would go up in 2021.

So given all of these clouds have been so busy saying all of this junk, I Guess the problem now is that there is actually no way that they can drop interest rates, because if they drop interest rates, it will be tantamount to admitting that they have no idea what they're doing. And while that is obviously the case and deep down, they probably know that they haven't got a clue themselves. It is considered bad politics to openly admit in public that you are a deadweight and a monkey throwing darts would probably do a better job than you. The good news for drawing power and his Mates is that shelter will stay high next month too.

And this means that at the next meeting, they can hold rates flat and they will use the same mumbo jumbo argument: Inflation is still above two percent is much too high, so it's prudent for us to keep rates High. It doesn't matter what all the components of the CPI are doing, It doesn't matter what the momentum is looking like, It doesn't matter where everything is trending, It doesn't matter where the underlying indicators are pointing because nobody reads that data anyway. But the economic problems on the back of the interest rate increases are not going away. The problem is not the fact that interest rates are at 5.25 That's actually a kind of reasonable interest rate if you ignore the situation since the 2008 financial crash when the FED forgot to increase rates back up.

historically, five percent is absolutely normal. The issue is the relative size of the rate and the speed at which it increased the commercial real estate loans. the regional U.S banks are carrying are not going away anywhere and will have to be refinanced. Many of those we're talking trillions of dollars will have to be refinanced at some point in the next few years.

Every month that the FED sits there sucking their thumbs instead of doing their jobs the ticking Time Bomb of commercial real estate. it is going to get worse because the monthly cash flow cost of refinancing these loans in some cases, sitting at about 80 percent higher than at the start of last year. The housing market has already slowed down under record Pace but the high mortgage rates can exacerbate this problem further and make it way worse. Businesses looking to borrow money to grow are not borrowing and this is going to affect the economy.

We now have a Mexican standoff where the U.S GDP is being directly screwed. Not by macroeconomic environments, not by nasty Putin, not by some other factor is being screwed by the inability of the Federal Reserve to do their job and the reluctance of the Federal Reserve to admit that they got it wrong to admit that they screwed up because as it stands, inflation is on the way down. It may take some time. Shelter might hang around for a little while, but blah blah blah but it is coming down.

Jobs are doing great, unemployment is at record lows. that's good, but GDP dipped in Q1 one to just 1.1 percent year on year and every month the FED dallies because they promised that they would keep the rates High to someone for the next two years. The US economy is going to feel the pain needlessly, more banks are going to begin collapsing or be at the brink, and it won't be because their management sucks. Well, their Management in many cases does suck.

but the primary reason will be because the FED over tightened and held the interest rate too high for too long without any good reason. We have a situation where a bunch of multi-millionaires the guys on this committee are sitting there deliberating whether their personal pride is more important than people's livelihoods. Jerome Powell is deciding whether sticking to what he said three months ago to save face is more important than people losing their jobs and being unable to feed their children. And then remember that there is a summer recess you see meeting every six weeks, which is what they do today.

For two days of drinking champagne and eating or whatever it is that they are doing instead of actually doing their jobs is extremely tiring. And of course you've got to take the time to go relax on your yacht and Central pay. So the FED goes and takes a break over the summer. Yeah, so we have two more meetings in June and July and then the next meeting after that is at the end of September and we know that the FED will not decrease rates in the next two meetings and they'll keep using these use of invasion is too high because it will still be above two percent.

But in September, we will get the August inflation data. That's four months more of inflation data coming in after today, and there is every chance that at that point we'll be staring at inflation diving below four percent. maybe going even lower while the raids continue sitting at 5.25 and quantitative tightening is technically still in effect. Banks are going to be stressed, businesses are going to be stressed, and Q2 GDP might just come in looking abysmal.

What is the Fed going to do then not reduce rates because they promised not to and send the US economy into a potential downward spiral just because they want to save face? Well, I Guess we're going to have to wait and see if you found this video useful. Please don't forget to smash the like button for the YouTube algorithm. And please do go and check out the daily upside. It really is worth it.

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