Lower oil and other moderated prices should cancel INFLATION WATCH. And Wall Street knows it

So what's going on in the latest episode of INFLATION WATCH?

The decline in headline inflation is partly due to falling gas prices.

Want to know where inflation is going?

You're better off focusing on core inflation (ex food and energy), which was 0.2% last month, and 4.0% over the past year. Again, better than the markets expected.

— Justin Wolfers (@JustinWolfers) November 14, 2023

Sounds good to me! Let's look at the CPI report and get more details.

he index for shelter continued to rise in October, offsetting a decline in the gasoline index and resulting in the seasonally adjusted index being unchanged over the month. The energy index fell 2.5 percent over the month as a 5.0-percent decline in the gasoline index more than offset increases in other energy component indexes. The food index increased 0.3 percent in October, after rising 0.2 percent in September. The index for food at home increased 0.3 percent over the month while the index for food away from home rose 0.4 percent.

The index for all items less food and energy rose 0.2 percent in October, after rising 0.3 percent in September. Indexes which increased in October include rent, owners’ equivalent rent, motor vehicle insurance, medical care, recreation, and personal care. The indexes for lodging away from home, used cars and trucks, communication, and airline fares were among those that decreased over the month.

The all items index rose 3.2 percent for the 12 months ending October, a smaller increase than the 3.7- percent increase for the 12 months ending September. The all items less food and energy index rose 4.0 percent over the last 12 months, its smallest 12-month change since the period ending in September 2021. The energy index decreased 4.5 percent for the 12 months ending October, and the food index increased 3.3 percent over the last year.

Wall Street used that flat inflation number to predict that the Fed was going to reverse some of their rate hikes sooner than later. Which means that it was time to jump back into the market!

The Dow Jones Industrial Average jumped 489.83 points, or 1.43%, to end at 34,827.70. The S&P 500 rallied 1.91%, briefly trading above the key 4,500 level, to settle at 4,495.70. It was the best day since April for the broad-market index. The Nasdaq Composite jumped 2.37% to close at 14,094.38.

Tuesday’s gains added to an already stellar performance this month for stocks. The S&P 500 and Dow are up 7.2% and 5.4%, respectively, in November. The Nasdaq is up 9.7%, on pace for its biggest monthly gain since January.

CPI was flat last month, while economists polled by Dow Jones expected a gain of 0.1% month over month. So-called core CPI, which strips out food and energy prices, was also lower than expected and rose at the slowest rate in two years. This instilled optimism into the market that the Federal Reserve could finally end its rate-hiking campaign for good.

“There’s optimism that inflation is cooling to a level where the Federal Reserve can take its foot off the brake,” said Keith Buchanan, portfolio manager at Globalt Investments.

The next day, we got more signs that inflation would stay under control for the future, as the Producer Price Index went down.

The Producer Price Index for final demand fell 0.5 percent in October, seasonally adjusted, after advancing 0.4 percent in September, the U.S. Bureau of Labor Statistics reported today. (See table A.) The October decline is the largest decrease in final demand prices since a 1.2-percent drop in April 2020. On an unadjusted basis, the index for final demand rose 1.3 percent for the 12 months ended in October.

In October, the index for final demand goods fell 1.4 percent. Prices for final demand services were unchanged.

The index for final demand less foods, energy, and trade services advanced 0.1 percent in October, the fifth consecutive rise. For the 12 months ended in October, prices for final demand less foods, energy, and trade services moved up 2.9 percent.

And a big reason for that drop in producer-level prices for goods was because of a drop in oil and related energy products.

Final demand goods: Prices for final demand goods moved down 1.4 percent in October, the first decrease since falling 1.5 percent in May. A major factor in the October decline was the index for final demand energy, which dropped 6.5 percent. Prices for final demand foods fell 0.2 percent. Conversely, the index for final demand goods less foods and energy edged up 0.1 percent.

That trend of lower oil prices is continuing in November, with today featuring a huge move down.

Oil falls nearly 5% as demand worries, inventory builds send prices off 20% from 2023 highs https://t.co/aL7LR1FpJM by @ines_ferre

— Yahoo Finance (@YahooFinance) November 16, 2023

Crude oil futures were down as much as 5% on Thursday as concerns of a supply squeeze faded amid rising inventories and fears of a slowdown in the global economy.

On Thursday, West Texas Intermediate (CL=F) crude oil futures fell 4.9% to settle at $72.90 per barrel. Brent (BZ=F) crude oil, the international benchmark price, fell by 4.63% to close at $77.42 per barrel.

Over the last month, WTI crude oil is down more than 16% while the price of Brent crude is off more than 14%....

On Wednesday, US inventories at Cushing, Okla. — used as the benchmark in WTI oil pricing — showed stockpiles rose by 3.6 million barrels last week, more than twice expectations for a build of 1.2 million barrels.

"The oil production surveys for October have been showing increasing amounts of OPEC+ production and combined with higher inventories in the USA and worries over demand, prices have been falling," said Andy Lipow, president at Lipow Oil Associates.

I think we’re pretty close to cancelling our intense INFLATION WATCH in this country (and I have argued we should have cancelled it a while ago). Instead, we need to make sure people don’t have to deal with unneeded strains due to interest rates that are too high, and have a better chance to afford housing. That affordability and maintaining job and wage growth are what our economic policymakers should care about as 2024 approaches, because 3% inflation for another year by itself will not cause any economic problems.

The question now is whether the regular media is going to report this fact, or if they'll still allow GOPs and other greedheads to keep up their dishonest whining and outdated takes, in order to avoid admitting that the overall economy is in very good place. And will the Fed admit the same, and get rates back down to atch up with the 3% annual inflation rate that we have been around for well over a year.