“Core Services” Inflation Gets Worse, “Core Goods” Inflation Backs Off: Yardstick for Fed’s Inflation Target, Core PCE, Nails What Powell Said Yesterday

Inflation moving “sideways” at very high levels for nearly a year and hasn’t come down meaningfully, Powell said yesterday, and as we see today.

By Wolf Richter for WOLF STREET.

Powell in his speech yesterday discussed the issues around inflation currently and expressed his frustration that inflation has moved mostly “sideways” at very high levels over the past 12 months, and hasn’t come down from those levels despite aggressive rate hikes. His whole discussion was focused on the “core PCE price index,” which the Fed uses as yardstick for its inflation target of 2%.

“Over 2022, core inflation rose a few tenths above 5 percent and fell a few tenths below, but it mainly moved sideways,” he said.

And so we got more of that today: The Core PCE price index (which excludes food and energy products) rose 5.0% year-over-year in October, a slightly slower increase than in September, a slightly faster increase than in August and July, and same as in June, according to the Bureau of Economic Analysis today. This was the last inflation report before the Fed’s next meeting in two weeks.

“Down months in the data have often been followed by renewed increases”: Powell. 

Powell also said that the Fed won’t be swayed by “a single month’s data.” The dip in October’s month-to-month data “followed upside surprises over the previous two months,” he said.

The chart of month-to-month core PCE readings shows how “down months in the data have often been followed by renewed increases,” as he said yesterday, citing estimates of data that was released today.

“It will take substantially more evidence to give comfort that inflation is actually declining. By any standard, inflation remains much too high,” he said yesterday.

On a month-to-month basis, the “core PCE” price index rose 0.2% from the prior month, a slower increase than the 0.5% jumps in September and August, according to the Bureau of Economic Analysis today.

The zigzag pattern of the month-to-month core PCE readings demonstrates what Powell meant when he said that the Fed won’t be swayed by “a single month’s data.”

The overall PCE price index (which includes food and energy products) rose 6.0% in October compared to a year ago, down slightly from the increases in the prior months, and same rate as in December 2021. The entire group of inflation readings since November 2021 have been the highest since 1982. In other words, this measure hasn’t meaningfully come down either, despite aggressive rate hikes! And that was a big theme in Powell’s speech yesterday – that there just hasn’t been any meaningful progress yet in the fight against inflation:

“Core Services” Inflation Gets Worse, “Core Goods” Inflation Backs Off.

In his speech yesterday, Powell cited the inflation data (based on Fed staff estimates) that was released by the BEA today, and he included it in his chart yesterday. We’ll revisit that chart now (though I already discussed it yesterday) because it dissects today’s core PCE data, and shows why the hoped-for inflation slow-down is just not happening.

Powell divided the core PCE price index into three categories (splitting core services into two, housing services and core services less housing):

  • “Core goods” (red line in the chart below) where inflation backed off from the spike.
  • “Housing services,” (thin blue line): rents surge and hit a new high in October, and Powell expects that surge to continue “well into next year.”
  • “Core services less housing” (fat greenish line), which accounts for over 50% of core PCE and tracks healthcare, insurance, education, repairs, personal services, etc. This is the biggie, and it rose in October, and isn’t showing any progress in moving down.

It boils down to this: the red-hot inflation in core goods that we saw in 2021 and earlier in 2022 has been backing off as supply chain constraints are being resolved. But services inflation has been getting worse, with “housing services” inflation continuing to spike and inflation in “core services less housing” once again on the upswing.

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  125 comments for ““Core Services” Inflation Gets Worse, “Core Goods” Inflation Backs Off: Yardstick for Fed’s Inflation Target, Core PCE, Nails What Powell Said Yesterday

  1. Minutes says:

    The beatings will continue until morale improves.

    • nvg says:

      Thats what they want, high inflation that will make all these
      trillions in debts just to evaporate

    • Gattopardo says:

      What Powell said: “the Fed won’t be swayed by a single month’s data.”

      What the market heard: “blah blah blah blah”

      • Arya Stark says:

        And the yield on the 10Y got clubbed like a baby seal today. Go figure.

        • Gattopardo says:

          Yha, 3.50%? WTH. That’s -100bps from around a month ago.

          The good news is I’m in no way tempted to extend and wear that risk. T-bills for me!

        • Jdog says:

          It is the 1Y you should be looking at. When you see a yield curve this drastically inverted, it is trying to tell you something if you are smart enough to listen to it……

        • Wolf Richter says:

          The yield curve inverted this drastically because the Fred raised the short end of the yield curve by 375 basis points in 9 months, the fastest rate hike pace in 40 years, and there isn’t anyone left on Wall Street that has ever been through this, and there is still too much demand for the long maturities at current yields.

        • Gabe says:

          Said 10yr yield is at the relative strength point where it has always roared back with a vengeance. The next 2 weeks will be telling. We’ll see if the trend continues very soon. 🧐

  2. boikin says:

    I just got an email that my streaming service will be going up in price 15% January 1st, due to rising costs. Looks like the service inflation will continue to run higher next year.

    • David Hall says:

      The price of gold reached $1800. earlier today.
      The price spiked to $2000 in March after Russian tanks rolled into Ukraine.

      • Escierto says:

        Barbaric relic!

        • Wolf Richter says:


          if you got any of them barbaric relics clogging up your garage, you can dispose of them properly by sending them to me. My Barbaric Relics Disposal services can handle that.

        • NBay says:

          You got a guy outside flipping a sign around yet?

          Don’t bother, South Park already did a show on how that already VERY well established industry works….one of their better shows, too.

      • SoCalBeachDude says:

        So, gold is now down 10% this year from it’s March peak.

      • Harrold says:

        That’s the price gold was 12 months ago. Nice hedge against inflation LOL

        • Seen it all before, Bob says:

          BTC is down from 60K to 17K in a year.
          PCE Inflation averaged 6% so the dollar purchasing power is down 6%.

          Gold is up 1% compared to the dollar from 1 year ago so it seems to be a poor winner as a hedge against inflation.

          Oil was the clear inflation hedge winner and is up 23% from 1 year ago. It is hard to hide it in the mattress.

        • Joe says:

          Best hedge against inflation is debt 😜

        • Brant Lee says:

          Go to bullion websites and look at the prices of collector coins. Silver eagles now have a 100% premium over the spot price averaging over $40. Just 3 years ago $20.

          Want to jump in? it’s too late, forget about it. Most dates are bought up, forever gone in quantity. It’s that funny thing called RARE. Collector coins (not crappy rounds and bars) are kicking butt in silver and gold.

          But never fear, you can still buy all the stocks and bonds you want, with endless supply. They’ll print more.

        • Seen it all before, Bob says:


          I agree. A 3% fixed 30 year mortgage is the best hedge against inflation. Why pay it off(other than peace of mind) when Treasuries are paying 4.8%?
          Better yet, why sell my house when it only helps the Fed drive down housing prices?

          I am living the dream of my Silent Generation parents who had 6% mortgages and 14% savings accounts. The middle class has been reborn!

          I haven’t been reborn yet but I am hopeful when 10/30 year Treasuries top 8-10%.

    • Augustus Frost says:

      That’s a discretionary expense which can be eliminated completely. (Yes, I know the increase is from a low base.)

  3. Gee says:

    I would suggest at this point that we look at the annualized rate of monthly inflation, and use a moving average of that somewhat more volatile series, to understand the recent trends. The Y/Y stuff now is quite misleading, as it is often at a level that is much higher than the running rates of recent months.

    It’s really the recent running rate of inflation (and various components) that really matters both in terms of level and direction. And of course, you have the lag issue with the shelter components, which really must be discounted at this point, as the actual price data for homes has been declining for 3-5 months, and rents appear to be possibly declining as well (although the seasonal component is hard to disentangle, given the pandemic impacts.)

    • Wolf Richter says:

      RTGDFA (Read The G*d D**n F***ing Article. ALL OF IT.

      Commenting guideline #1: Do not comment on what you imagine the article says based on the headline or the first paragraph. If you haven’t read the entire article, do not comment on the article itself because you don’t know what it says, and your imagination is likely wrong. A comment will go into the shredder if it’s clear to me that a commenter is discussing, or especially arguing with, what they think the article said, when the article didn’t say it (the shredder replaces the tag “RTGDFA”).


  4. Butt on the Couch says:

    WOLF, always great to see this awesome data. I’m definitely feeling the pain on Core Services less Housing since I’m already locked into a fixed rate mortgage.

    I’m postponing my hair appointments (ugh, gray hair) and stopped all nail appointments. Insurance is up; my taxes are out of control; I have zero plans for the Holidays and I have planted my butt on the couch. Spent very little on Black Friday Christmas presents this year. I haven’t figured out how everyone is traveling and spending.

    • NBay says:

      RE; Core services less housing (BTW good chart)

      In Safeway parking lot I saw a guy with a big white unmarked Nissan van sorting out cool looking electro mechanical sub assemblies and parts. Asked him what it was and he said StarBucks machines parts. Asked him if it replaces jobs and he said “all they have to do is keep coffee hopper full and push buttons”, machines did EVERYTHING else. He worked for a Swiss company that did ALL Starbucks machines, and was provided company truck and serviced the machines. Congratulated him on scoring robot maint job like I had in the Post Office.

      Nothing was mentioned by either of us about how many people had lost jobs, just that we were fortunate to have been interested in stuff like building Heathkits and such as kids.

      In other words, we were totally LUCKY clock punchers, and most ARE NOT. He was too young to remember union trashing program 40 or so years ago, so I didn’t bring it up.

      • NBay says:

        Now that I think of it, the beans could easily come from behind the wall, too, but I think it’s more of a marketing thing that customers like to see and smell. Adds to their “connoisseurs of fine things” image…..for self and others.

        • NBay says:

          Oh yeah, the parts he was sorting out were for the expresso machine, I have no idea what the other fine shit they sell is, just have heard Italian sounding names, from time to time.
          Sorry about ugly fingernails, BFWIW, I never EVER was turned on by fingernails….guess it’s for the other girls.

      • ru82 says:

        Making coffee sounds like a great robot type of job. It can free up people to do other things. We need a lot of nurses.

      • Lisa_Hooker says:

        Wow. Heathkits. And we built Eico kits too. And Allied Electronics’ Knightkits. We did actual hands-on electronics with longnose, dikes and soldering irons. That was before the endlessly repeating edit->compile->link->debug->edit cycle.

    • eg says:

      Heard on the radio this morning that Canadians are planning to spend 19% less this year than last during the holiday season.

      Anyone still pretending we’re not going to get a recession?

  5. GringoGreg says:

    It takes 9 months to a year for hikes to bite on the economy. Many parts of the economy are starting to roll-over along with the rest of the world(Europe and Britain are in deep doo-doo) and once the holiday gift buying party is finished 2023 will hit GDP like a mammoth meteorite!
    Of course, a massive spike in oil and gas, which is in the cards eventually will be the inflationary wild card!

    • Miller says:

      Very true with Britain, though Europe as far as EU has been a lot more resilient than we expected. At start of year we were expecting the EU’s big countries to all be deep in recession by mid-2022, instead they’ve powered right thru and even Germany has kept growing, France has been surprisingly strong. (It was actually the US that had two consecutive quarters of contraction in Q1 and Q2, but still with employment and spending holding up it wasn’t a recession here either) Some us had basically shorted the EU and got burned, maybe a lesson for investors to be cautious about predicting downturns in countries with strong exports and tourist markets.

      The predictions were based on consumers there being hard pressed by the ECB’s lunatic monetary looseness policies like Wolf pointed out (even worse than the Fed, hard as that is to believe), and the EU’s inflation is indeed higher now, though the bigger price hikes kicked in earlier for the USA. But export-heavy countries like Germany can often still grow pretty solidly even if their own consumers aren’t feeling too great by basically hitching to other consumer markets. And for France, the gangbusters growth was prob. due in big part to more travelers with easing of pandemic restrictions, so much heavier tourism revenue. That’ll probably continue even more in 2023.

  6. GringoGreg says:

    Listen up ladies and gents I have created a new inflation proof token which is on sale now for the bargain basement price of $100 greenbacks. It’s sure to go to a million smackerooos within 6 months.

    Scam Bankrun-Fraud

    • phleep says:

      SBF did a face-plant, he is poster child for the most howling-ludicrous gimmicks and excesses. But I wonder about the next bunch of companies, not quite so ridiculous, but floating on leveraged loans or whatever. I wonder why the markets seem so sanguine, throwing fresh money at them this week, even the small caps? Apparently the euphoria is still lingering.

    • Miller says:

      lol the craziest thing is, this is just about exactly how many of those new meme-coins are created in the crypto space and marketed. One of the original selling points about Bitcoin as inflation hedge was supposedly that it was supply limited and so resistant to inflation, the problem is then there are about 100 other coins created every month to add to the crypto supply. So BTC, Ethereum, Monera then have dozens of other digital tulips to add to their “value”, without any kind of rhyme or reason for why they hold any value at all. Just bits on a screen and algos solving hash puzzles that not even most crypto bros understand. At least with the tulips in Holland, the tulip bros had to have a field or an actual supply of the flowers. For crypto, you can just conjure a coin out of thin air, and hope enough dupes are out there to buy into it

      • NBay says:

        We used hashing as a way to save memory and processing time on Optical Character Readers in early 80’s. Simple concept, take a word like “dollar” and see how many letters you can omit and still get a good probability of reading it correctly, with the context (surrounding likely words) usually helping you. But it could also be algo generated number strings, and then the guessing would be the algo used. The more difficult you make either, the harder it is to “mine” for the answer.

  7. John Urbik says:

    I work in the airports… I went to Duncan Donuts to buy a “cheaper” cup of coffee vs. Starbucks. Paid $4.85 for a large coffee with cream. Not long ago this was about $2.50. I don’t think the CPI matters when the contort the inputs to achieve the desired results. The real purchasing power of the USD is being decimated. Might as well save some money and shut down the BLS!

    • Miller says:

      yeah this used to be one of our little affordable morning comforts, getting decent coffee at Duncan that was supposed to be twice as affordable as Starbucks. Now even Duncan is letting inflation rip and Starbucks prices are even more lunatic than they to begin with. Our philosophy is becoming if you can’t pick it up to brew yourself from Aldi, Sam’s club, Lidl, Costco or the other discounters, it’s probably not worth parting with your cash for, at least until prices return to some level of commonsense

      • Lisa_Hooker says:

        Prices will not go down much, if at all.
        Wages will rise to meet prices.
        This is going to take a long, long time.
        If you live on a fixed income you are screwed.

    • Prairie Rider says:

      RUST-OLEUM Corp., yeah the paint company, makes a great coffee machine cleaner in the USA by the name whink. I use it once a month on my old but functional electric drip coffee machine. Burr grinding the beans is easy and the best IMO.

      At CUB Foods, two pounds of medium roast organic Colombian coffee beans roasted in the Twin Cities by the company that sources the beans from their growers, and also owns the roasting facility, Grupo Nutresa S.A., costs $14.99.

      I am a coffee addict. I am a frugal person. I have a thermos when I want to feed my addiction on the road. Do the math on a daily coffee hit (or two) at a Starbucks, and calculate the numbers on a monthly or yearly basis. It freakin’ adds up! Plus, at home, I get my fix minutes after getting out of bed — Minnesota winter weather makes no difference when feeding the monkey ASAP in my kitchen.

      I’m just sayin’…

      • eg says:

        We make all our own coffee at home, too — it’s something like 50 times cheaper (maybe even more so since I last calculated). I find that we can make a tolerable brew out of even the cheapest grocery store grind with our Aeropress (basically a French Press with a filter)

      • Lisa_Hooker says:

        Ha. I buy green coffee. Roast it in a popcorn popper to exactly what I like. Grind it in a hundred year old hand cranked coffee mill I inherited. Brew in the best 4 cup drip coffeemaker ever made, which they quit making 10-12 years ago, or in a basic stovetop Bialetti Moka Express 3 cup or 6 cup. I like coffee. Never bought a $tarbuck$.

    • NBay says:

      Yeah, hell, why try to regulate ANYTHING? One big waste of money. Just think of the total “freedom” in driving 100 mph anytime YOU want!
      Not to mention pissing off those damned socialists.

      • NBay says:

        And those horribly austere lifestyles the rest of you are prepared to accept…..wow…..it’s almost like you all lived in caves again. You must be so proud for taking so little from the planet.

        • Seen it all before, Bob says:

          I’ve been living an austere lifestyle for decades.

          I just want my interest rates to go back up to a normal 200 year market year rate and get the Fed out of controlling my life. Of course, if it is a true emergency, they should save me.

          If it makes me a raving libertarian, and my neighbors lose on housing and FTX, so be it. I haven’t fallen for a ponzi scheme yet.

      • NBay says:

        OOPS…wish I could remember how that sometimes happens.
        Senility/stupidity strikes all sooner or later.

  8. A says:

    The same people who ignored housing inflation data and said inflation was “transitory” are the same people pointing to that exact same housing data they previously slandered to say inflation has peaked.

    It’s amazing how virtually nobody in the business press has any idea how inflation works at all. They all just have magical thinking that inflation can’t possibly persist.

    • Depth Charge says:

      Jerome Powell is desperately searching for “green shoots” of waning inflation. It’s too bad he didn’t have that same microscope out for signs of raging inflation. Instead, he wore blinders.

      • cb says:

        They always want inflation. Their goal is 2%. Labor and savers are too naive to demand better, The financial engineers like it.

    • eg says:

      I don’t see much evidence that any school of economics has a good grasp of what “inflation” is, and as a result a useful set of principles for managing it. Mostly they rely upon an infinite regression for determining the price level.

  9. Janna says:

    Come January, social security checks and government wages will be higher. Will these payment increases impact inflation in any meaningful way? If anything, it seems as though it might give millions of people more spending confidence especially since those groups aren’t necessarily as concerned about job stability.

  10. SoCalBeachDude says:

    FDIC-Insured Institutions Reported Net Income of $71.7 Billion in Third Quarter 2022

    Net Income Increased Quarter Over Quarter and Year Over Year
    Net Interest Margin Widened
    Unrealized Losses on Securities Increased
    Loan Growth Was Broad Based
    Asset Quality Metrics Remained Favorable Despite Growth In Early-Stage Delinquencies
    Community Banks Also Reported Increased Net Income


    “The banking industry reported generally positive results in the third quarter as loan balances strengthened, net interest income grew, and asset quality metrics remained favorable. Looking forward, the effects of inflation, rising market interest rates, and continuing geopolitical uncertainty will continue to challenge bank profitability, credit quality,
    and loan growth.”

    — FDIC Acting Chairman Martin J. Gruenberg

  11. Djreef says:

    Thank you for this Wolf.

    • WolfGoat says:

      Agreed…. he’s one of the best analysts in da biz… even if a bunch of people don’t ‘read the gosh darn friggin’ articles’!

  12. Bruce Kellogg says:

    Every “system” has a “time constant” for changes, intentional or incidental, to occur. Market watchers and participants are hardly taking this into account. Hence, there is volatility.

    What we are seeing is markets topping worldwide as “time constants” apply to national economies.

    Get used to it. And don’t fight the trend.

    • NBay says:

      The second, symbol s, is the SI unit of time. It is defined by taking the fixed numerical value of the cesium frequency ΔνCs, the unperturbed ground-state hyperfine transition frequency of the cesium 133 atom, to be 9 192 631 770 when expressed in the unit Hz, which is equal to s-1.

      Yeah, get used to it.

      • 91B20 1stCav (AUS) says:

        NBay – nostalgically tuning in WWV on the shortwave as I type (critical in setting one’s clocks to ‘true time’ for TSD auto rallying, something I frittered a lot of effort on in my youth…).

        may we all find a better day.

      • Lisa_Hooker says:

        At which velocity with reference to what?
        You can’t get used to it.

        • NBay says:

          “Most everyone’s mad here. You may have noticed that I’m not all there myself”

          -The Cheshire Cat

  13. SoCalBeachDude says:

    MW: Costco stock slides 6% as Oppenheimer removes it from top pick list after disappointing November sales numbers

  14. Ghassan says:

    If you listen to CNBC or follow the ten year bond you think inflation is over, even Mohammed elarian talks about inflation & rate hick risks as is behind us and he is one of few commentators who has been taking against the trend for a year till now!
    Considering the unrealistic projected earning which has to be adjusted in some point plus QT (even though very slow) plus possibility of a recession I don’t understand the victory lap from the stock market either.

    • sunny129 says:


      the mkts remain disconnected with the economy on the ground b/c every thing depends upon FFR just like since March of ’09.

      Anticipation and front running is built into these mkts, thanks to Fed’s repeated
      bailing out the mkts with ZRP, QEs, twist and what not!?

      His speech was somewhat ‘hawkish’ but during Q&A, became dovish, uttering concern of over tightening. Mkts took off. Why blame them?

      Just a day or two ago, 3 FOMC members including ‘perma dovish’ Mr. Bullard uttered only HAWKISH comments unlike Mr. Powell.

      Mr. Powell has lost the credibility. just like during last July speech, mkts called his policies a ‘bluff’

      • Anthony A. says:

        I’m guessing that Powell is glad this speech is over and the rate increase will be 1/2 percent as he mentioned it could be. He’s probably now focused on his Xmas shopping and holiday partying plans going forward.

      • NBay says:

        Yeah, I only saw the Q&A and got the same impression…….seemed real afraid of the R word being dumped on him.

    • Depth Charge says:

      El-Erian was working for PIMPco when they were rating everything AAA when it was subprime garbage. What was his role in the fraud? He’s got the credibility of Bernie Madoff, in my opinion.

      • Augustus Frost says:

        PIMCO isn’t a bond rater. Whatever misleading claims they made was as a bond cheerleader. As a fund manager, I presume they did some of that.

        • Depth Charge says:

          You’re right. Moody’s was rating the garbage that El-Erian was selling as AAA. El-Erian was shoveling the garbage far and wide.

        • NBay says:

          Don’t think you got out of that one.

      • cb says:

        Whatever happened to Bill Gross, who El-Erian was second fiddle too for many years?

    • AB says:

      The downtrend in the 10-yr yield should soon rotate back into a meaningful uptrend but it’s not certain to do so. The Fed made such an effort at Jackson Hole to reality check markets. It’s quite a long climb back to 4.25% or higher with 0.75% increments off the table.

      • DawnsEarlyLight says:

        True, but short term treasuries lead thier rate increases.

        • AB says:

          That’s right and my point. The Fed doesn’t appear to have much control over the yields of longer dated Treasuries.

          Moving away from 0.75% rate increases on the FFR might have surrendered the belly and long end of the curve to the market. That might not be a bad thing for market accuracy but it troubled the Fed only very recently. The Fed can’t deploy its Jackson Hole water cannon again any time soon.

          The terminal rate has never been fixed in practice against raging inflation so teasing that higher doesn’t compensate for the lower rate rises or possible shortcomings in MBS shedding.

          I agreed with Gundlach about bonds but accept this story likely has further to run.

        • NBay says:

          IIRC, Mo-El was the partner of the old “Bond King”, Gundlach became the new one.
          Still not sure who does the coronations.
          Maybe in a process similar to Kramer’s old Halls of CEO Fame and Shame?
          I remember when (his personal friend) Eddie Lambert was on his Hall of CEO Fame.
          Wolf did some good articles on “Fast Eddie”.
          I hate/fear PE.

  15. Goldlaerche says:

    How much of inflation is directly or indirectly gas prices? WTI yoy difference versus inflation? One more month and WTI yoy will turn and likely stay deeply negative for a while. How is that expected to be reflected in inflation measures in the next couple of months?

    • Wolf Richter says:

      Gas prices are about flat year over year and are way down from earlier this year. Gas prices have contributed largely to the decline in overall inflation rates.

      • Goldlaerche says:

        Thanks, Wolf, that’s what I figured; and if gas stays near where it is today for a couple months than it will be 30% below the peak a year prior. That ought to put a big damper on inflation numbers coming out in the months ahead, no? Basically as we are on the other side of that large wave the baseline is now moving higher by the day towards the peak behind us relative to which the yoy deflation will keep increasing.

  16. MiTurn says:

    ” The entire group of inflation readings since November 2021 have been the highest since 1982.”

    Remember in the early ’80s when candy bars suddenly doubled in price (from 25 cents to 50 cents), but didn’t double in size?

    Hedonics that!

    • Anthony A. says:


      EZ open packaging, more HFCS concentration per cubic millimetre of bar, more nuts versus voids in the bar, higher quality chocolate…..shall I go on?

    • The Real Tony says:

      It was the early 1970’s. I remember soda pop went from 10 cents to a quarter in the vending machines.

      • VintageVNvet says:

        How about remembering, ”Twice as much for a nickel too, Pepsi Cola is the one for you.” RT?
        Don’t remember the year in the ’50s that slogan was the big news for us kids earning 2 cents per newspaper sold — plus tips of course — but it was certainly a BIG deal!!!
        ( Cokes were 5 oz, and Pepsi came out with the 10 oz, for those of you who don’t remember…LOL )

        • NBay says:

          In 1960 or so I lived in Fontana and almost everyone on our street worked at Kaiser Steel. So, from some process there, everyone’s dad came home with these quarter sized slugs that WORKED!
          So they gave them to us kids, change then was a dime and a nickel, and all they wanted was the nickel so they could use that and a slug for a pack of cigs. We made a lot of dimes and drank a lot of sodas, but it didn’t last long, and wherever the slugs came from was stopped.
          Fun while it lasted.

        • 91B20 1stCav (AUS) says:

          NBay – initially-fungible tokens!

          may we all find a better day.

        • Lisa_Hooker says:

          NBay – I think it was in the early 70’s when pop-top cans first came out. The finger ring was the size of a nickel and worked just fine in parking meters. Didn’t last too long.

      • eg says:

        My first encounter with “shrinkflation” was the size of the Wagon Wheels I bought for a nickel at the hockey arena after my games in the early ‘70s. It’s the oldest dodge going despite fooling nobody, not even 10 year old boys …

    • Lisa_Hooker says:

      The critical shrinkage is the 12oz beer bottle that is now 11.5oz or in some cases down to 11.2oz. Then there’s the 14oz Haagen-Dazs “pint.”

  17. Bobber says:

    I find it interesting that inflation shot up so quickly. In my mind, the only thing that can explain the steepness of the rise is the herd mentality of businesses with respect to pricing. When a business sees a competitor raise prices, that business will immediately raise them too. Plus, many business don’t want their margins eroded, so they price ahead of inflation.

    Thus, a lot of the inflation we are seeing could be attributable to corporate profit protection and opportunism, which could reverse due to higher profit margins and increased competition in the future, assuming our economy is not structurally broken (entirely).

    • eg says:

      This. It amazes me that anyone gets away for blaming wages for initiating these cycles — ever.

      We’re supposed to believe that Joe Lunchpail is controlling prices? Pull the other one.

    • cb says:

      The inflation we are seeing is a result of money printing.

  18. Phoenix_Ikki says:

    “Powell in his speech yesterday discussed the issues around inflation currently and expressed his frustration that inflation has moved mostly “sideways” at very high levels over the past 12 months”

    Wonder if he is capable of self reflection and be frustrated at himself for saying inflation is “transitory” and sequentially help shred more of his credibility down the toilet, which then lead to a tough job for him as the market is on full fight the FED mode. They probably won’t win but at the end consumers lose big time with prolonged inflation…great job there

  19. GringoGreg says:

    The 5% interest rates with slam the economy but the QT will obliterate the 10s of trillions in debt and quadrillions in derivatives denominated in US$! Borrowers will have the one-two punch of higher borrowing costs while chasing a shrinking pool of $$$ to pay those higher interest payments! Something BIg will break, much larger than Credit Swiss, amd Fed rate cuts won’t be able to put humpty dumpty back together again!
    I’m a seller of the xmas-party-bear-market rally and ready to short into the 2023 collapse!!!

  20. Ev Last says:

    The reason the thin blue line in figure 2 (housing services) is increasing is because increasing interest rates increases carrying costs of landlords, which is passed on to rent payers. Since the Fed expects to continue to push rates higher, they will expect the housing services to continue to inflate; thus initially, the cure for inflation is causing more inflation in this category- it being the largest contributor to CPI. So why is everyone expecting a pivot?

  21. Sporkfed says:

    If there hasn’t been any meaningful progress in fighting inflation, why just a .50 rate hike ?
    Actions speak louder than words.

    • Kevin says:

      they did four consecutive 75 hike, so they are worried another 75 could crash the economy or the market. But what I think they totally failed to do is increase QT to 120 billion a month, the same time they did QE for the last two years.

  22. CreditGB says:

    Doctor: Good news, bad news and best news:

    Good news is yes we have stitched up 7 of your thousand cuts, and you are bleeding out slower than yesterday.

    Bad news is you are still losing massive amounts of blood. No telling when you will pass out.

    Best news is you still have a little time left, and are invited to our party celebrating the 7 cuts we’ve manage to seal up for you. Looking forward to seeing you there and getting your donation to our campaign.

  23. THEWILLMAN says:

    The growth rate of inflation is sideways =/= inflation is sideways. 6% sustained inflation is a doubling of prices every 12 years.

    Seems like a calculated misrepresentation to use the word “sideways” on Powell’s part.

  24. patrick says:

    observations from being in new orleans this week – spending is $TRONG! asked our landord vrbo ” how are bookings?” he has 11 units – his reply ” very strong at 90% capacity through jan and this is the slow time!” – asked him where does the money come from for this strength? his answer many conferences that are funded with government dollars/grants – right now there are thousands of people in town attending a “french language” conference lots of people from the caribbean and they fill his units except for ours – and the gravy train continues unabated and no end in sight!

    • paul.w says:

      Is this the beginning of repudiation of the currency? Buy it now, because in the future it will cost more? If true, the inflation will feed upon it’s self.

  25. HR01 says:


    Many thanks. Inflation looks primed to resume its uptrend in 2023, regardless of where core goods inflation heads next.

    Question: What are the percentage weights for each of these three sub-components of core PCE? Also are these three components parsed out by BEA or Fed-derived?

    • Wolf Richter says:

      I have not yet found access to the detailed data at the BEA. If I tried a little harder, including emailing them, I might get access too. The three categories is what Powell discussed in his speech, and he posted the chart with the three lines. It’s all his.

      He said that “core services without housing” accounts for over half of core PCE. So that leaves the other two to split amongst them the remaining “less than a half.” So each might have less than a quarter.

  26. rojogrande says:

    Wolf, under “Core services less housing” before the final graph, did you mean core PCE (instead of CPI)? Either way, please delete this comment.

  27. BS (ini) says:

    An interesting analysis of the inflation data by Powell. Maybe he was deliberately creating calm in the markets heading into Christmas.
    I believe that these are bear market rallies from low volume drops last few days and the so called Christmas rally in both bond and stock markets. I know these wallstreet folks can manipulate markets based on volume so maybe the large drop in 10 year today is a volume related phenomenon.
    The next two weeks the mutual funds will have to be sellers to raise cash for distribution. I liked the comment about SS increases and wolf comment about cash finally creating income which could easily continue the inflation party. Next year the Fed will make sure that inflation is under control with the same resolve that we as a county needs. 2024 is an election year and the Fed will want this inflation behind them. They have 1 more year .

  28. graphic says:

    The 8.25% drop in DXY since 27 Sep tells us the markets, the public and the world stopped believing the Fed would crack down on inflation after the 22 Sep Fed meeting and really, really stopped believing it after the 2 Nov meeting. The Fed has lost credibility and it won’t be restored with a 50bps rate rise on 14 Dec.

    “By any standard, inflation remains much too high.” Jerome, that’s because 75bps rate rises every six weeks were too little, too late.

    • Wolf Richter says:

      Doesn’t matter what you or anyone else “believes.” Believe is something folks should do in church. What matters is what the Fed does. And it has hiked rates at the fastest pace in 40 years, and it’s going to hike some more, and it’s conducting QT at the fastest pace ever. People can believe whatever they want.

      Back in the summer of 2020, the bond market believed that rates would go negative, and the 10-year yield dropped below 0.5%. Nothing is dumber than a bunch of idiots in the markets relying on their beliefs.

      • Seen it all before, Bob says:

        The 10 year bond funds are suffering from this stupidity of <0.5%.
        Millions of conservative retirees with their 60% bond accounts are suffering. Thank goodness for Social Security COLA. They could be earning 4% but they trusted the market and went in at 0.5%. They can't get out for 10 years. I hope they can survive with a 0.5% ROR in a 6% inflationary market. I hope the more ambitious retirees who lost 20% in the stock market can feed themselves on SS.

        • cb says:

          I feel for them. Regardless,

          it was imprudent to tie up money long term for less than .5%

          it was imprudent, if not stupid, or perhaps desperate to chase the stock market

          the FED, Bankers and Government have their fingerprints all over this

      • BeeKeeper says:

        As you said, inflation is mostly psychological factor, what people BELIEVE in.

        QE (wealth transfer) is BELIEF system, that we are better off with QE rather than going through boom-bust cycles.

        Also, people at FED BELIEVED that inflation is transitory. Look where we are now. It matters greatly what people BELIEVE and how they act on it! No church needed for FED? Unless it’s a cult of economists with certain BELIEVEs? Who knows?

      • cb says:

        Well here’s a fact or two for you ……………..

        “By any standard, inflation remains much too high.”

        “Jerome, that’s because 75bps rate rises every six weeks were too little, too late.” as graphic said.

  29. Alex J. Pollock says:

    Very good piece on inflation, Wolf. I wonder if you agree with the ideas in my following letter to the Financial Times:
    Olivier Blanchard is so right that “it is time to revisit the 2 percent inflation target,” but so wrong that the target should be increased to 3% or 4%. The last thing we need is central banks enabling even more financial and economic distortion. Far better would be to revisit the target by reducing it to the original New Zealand form: zero to 2%. Even better would be a target range of -1% to 1%, both recognizing that mild deflation with rising real wages can result from innovation and productivity, and aiming for a long run average inflation close to “zero when correctly measured,” as Alan Greenspan suggested. I believe future financial historians will in retrospect conclude that the spectacle of central banks earnestly trying to push inflation up, as they were, was as odd as was fervent belief in cryptocurrencies.

    All the best, Alex

    • Wolf Richter says:

      Agree. Excellent comment.

    • cb says:

      It is a great comment Alex. And won’t be adhered to, in spite of it’s obvious truth and common sense, because it inhibits the theft by the FED/Banker masters in the quest of wage and debt dependence by the slave masses.

  30. dang says:

    Thanks for your level headed reporting of the indisputable facts. The interpretation of the facts is where, rightfully, in a sophisticated society, the battle begins.

    I watched Powell’s address from, of all places, the Brookings Institute ? OK, I thought to myself, this is going to be a libertarian celebration by the winners about the majesty of the government sponsored “free market”. I was right.

    • dang says:

      I agree that most of Powell’s speech was logical, honest, and straight forward.

      It was the “dovish” drivel, that emitted that caused a fractional decrease in my blood temperature. A

      Announcing the Fed’s Dec 14th decision about a 50 basis point increase in the FFR, was, to say the least, inappropriate.

      • dang says:

        I think, Jerome “foot in his mouth” Powell, reset the Fed’s credibility back into the “captured” pen.

        He’s either a dufus or a criminal.

        He caused the speculative revaluation of over a trillion dollars of paper assets in a day with his commitment that the FRB would increase the FFR by 50 basis pts on Dec 14.

        • dang says:

          After recognizing that inflation is more likely to increase than decrease., given the propensity for an increase of government stimulus spending to counter the sag caused by removal of the monetary stimulus.

          After an increase of 375 bpts in the FFR, the inflation rate that has remained unchanged.

          Remember, when we started lifting the FFR in response to raging inflation, the rate was 0 – 0.25. We were doing QE again, as are part to combat covid.

          Then he got to the good part for his audience. The increase in wages is comfortably less than the increase in prices, even by the lax standards we have chosen to measure them.

          The grift exploded.

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