A
sign
advertising
units
for
rent
is
displayed
outside
of
a
Manhattan
building
on
April
11,
2024
in
New
York
City.
Spencer
Platt
|
Getty
Images
The
early
data
is
in
for
the
path
of
inflation
during
the
first
three
months
of
2024,
and
the
news
so
far
is,
well,
not
good.
Pick
your
poison.
Whether
it’s
prices
at
the
register
or
wholesale
input
costs,
while
inflation
is
off
the
blistering
pace
of
2022,
it
doesn’t
appear
to
be
going
away
anytime
soon.
Future
expectations
also
have
been
drifting
higher.
Investors,
consumers
and
policymakers
—
even
economists
—
have
been
caught
off
guard
with
just
how
stubborn
price
pressures
have
been
to
start
2024.
Stocks
slumped
Friday
as
the
Dow
Jones
Industrial
Average
coughed
up
nearly
500
points,
dropping
2.4%
on
the
week
and
surrendering
nearly
all
its
gains
for
the
year.
“Fool
me
once,
shame
on
you.
Fool
me
twice,
shame
on
me,”
Harvard
economist
Jason
Furman
told
CNBC
this
week.
“We’ve
now
had
three
months
in
a
row
of
prints
coming
in
above
just
about
what
everyone
expected.
It’s
time
to
change
the
way
we
think
about
things
going
forward.”
No
doubt,
the
market
has
been
forced
to
change
its
thinking
dramatically.
watch
now
Even
import
prices,
an
otherwise
minor
data
point,
contributed
to
the
narrative.
In
March,
it
posted
its
biggest
increase
for
a
three-month
period
in
about
two
years.
All
of
it
has
amounted
to
a
big
headache
for
markets,
which
sold
off
through
most
of
the
week
before
really
hitting
the
skids
Friday.
As
if
all
the
bad
inflation
news
wasn’t
enough,
a
Wall
Street
Journal
report
Friday
indicated
that
Iran
plans
to
attack
Israel
in
the
next
two
days,
adding
to
the
cacophony.
Energy
prices,
which
have
been
a
major
factor
in
the
past
two
months’
inflation
readings,
pushed
higher
on
signs
of
further
geopolitical
turmoil.
“You
can
take
your
pick.
There’s
a
lot
of
catalysts”
for
Friday’s
sell-off,
said
market
veteran
Jim
Paulsen,
a
former
strategist
and
economist
with
Wells
Fargo
and
other
firms
who
now
writes
a
blog
for
Substack
titled
Paulsen
Perspectives.
“More
than
anything,
this
is
really
down
to
one
thing
now,
and
it’s
the
Israel-Iran
war
if
that’s
going
to
happen.
…
It
just
gives
you
a
great
sense
of
instability.”
High
hopes
dashed
In
contrast,
heading
into
the
year
markets
saw
an
accommodative
Fed
poised
to
cut
interest
rates
early
and
often
—
six
or
seven
times,
with
the
kickoff
happening
in
March.
But
with
each
months’
stubborn
data,
investors
have
had
to
recalibrate,
now
anticipating
just
two
cuts,
according
to
futures
market
pricing
that
sees
a
non-zero
probability
(about
9%)
of
no
reductions
this
year.
“I’d
love
the
Fed
to
be
in
a
position
to
cut
rates
later
this
year,”
said
Furman,
who
served
as
chair
of
the
Council
of
Economic
Advisers
under
former
President
Barack
Obama.
“But
the
data
is
just
not
close
to
being
there,
at
least
yet.”
This
week
was
filled
with
bad
economic
news,
with
each
day
literally
bringing
another
dose
of
reality
about
inflation.
It
started
Monday
with
a
New
York
Fed
consumer
survey
showing
expectations
for
rent
increases
over
the
next
year
rising
dramatically,
to
8.7%,
or
2.6
percentage
points
higher
than
the
February
survey.
The
outlook
for
food,
gas,
medical
care
and
education
costs
all
rose
as
well.
On
Tuesday,
the
National
Federation
of
Independent
Business
showed
that
optimism
among
its
members
hit
an
11-year
low,
with
members
citing
inflation
as
their
primary
concern.
Wednesday
brought
a
higher-than-expected
consumer
price
reading
that
showed
the
12-month
inflation
rate
at
3.5%,
while
the
Labor
Department
on
Thursday
reported
that
wholesale
prices
showed
their
biggest
one-year
gain
since
April
2023.
Finally,
a
report
Friday
indicated
that
import
prices
rose
more
than
expected
in
March
and
notched
the
biggest
three-month
advance
since
May
2022.
On
top
of
that,
JPMorgan
Chase
CEO
Jamie
Dimon
warned
that
“persistent
inflationary
pressures”
posed
a
threat
to
the
economy
and
business.
And
the
University
of
Michigan’s
closely
watched
consumer
sentiment
survey
came
in
lower
than
expected,
with
respondents
pushing
up
their
inflation
outlook
as
well.
Still
ready
to
cut,
sometime
Fed
officials
took
notice
of
the
higher
readings
but
did
not
sound
panic
alarms,
as
most
said
they
still
expect
to
cut
later
this
year.
“The
economy
has
come
a
long
way
toward
achieving
better
balance
and
reaching
our
2
percent
inflation
goal,”
New
York
Fed
President
John
Williams
said.
“But
we
have
not
seen
the
total
alignment
of
our
dual
mandate
quite
yet.”
Boston
Fed
President
Susan
Collins
said
she
sees
inflation
“durably,
if
unevenly”
drifting
back
to
2%
as
well,
but
noted
that
“it
may
take
more
time
than
I
had
previously
thought”
for
that
to
happen.
Minutes
released
Wednesday
from
the
March
Fed
meeting
showed
officials
were
concerned
about
higher
inflation
and
looking
for
more
convincing
evidence
it
is
on
a
steady
path
lower.
watch
now
While
consumer
and
producer
price
indexes
captured
the
market’s
attention
this
week,
it’s
worth
remembering
that
the
Fed’s
attention
is
elsewhere
when
it
comes
to
inflation.
Policymakers
instead
follow
the
personal
consumption
expenditures
price
index,
which
has
not
been
released
yet
for
March.
There
are
two
key
differences
between
the
CPI
and
the
PCE
indexes.
Primarily,
the
Commerce
Department’s
PCE
adjusts
for
changes
in
consumer
behavior,
so
if
people
are
substituting,
say,
chicken
for
beef
because
of
price
changes,
that
would
be
reflected
more
in
PCE
than
CPI.
Also,
PCE
places
less
weighting
on
housing
costs,
an
important
consideration
with
rental
and
other
shelter
prices
holding
higher.
In
February,
the
PCE
readings
were
2.5%
for
all
items
and
2.8%
ex-food
and
energy,
or
the
“core”
reading
that
Fed
officials
watch
more
closely.
The
next
release
won’t
come
until
April
26;
Citigroup
economists
said
that
current
tracking
data
points
to
core
edging
lower
to
2.7%,
better
but
still
a
distance
from
the
Fed’s
goal.
Adding
up
the
signals
Moreover,
there
are
multiple
other
signals
showing
that
the
Fed
has
a
long
way
to
go.
So-called
sticky
price
CPI,
as
calculated
by
the
Atlanta
Fed,
edged
up
to
4.5%
on
a
12-month
basis
in
March,
while
flexible
CPI
surged
a
full
percentage
point,
albeit
to
only
0.8%.
Sticky
price
CPI
entails
items
such
as
housing,
motor
vehicle
insurance
and
medical
care
services,
while
flexible
price
is
concentrated
in
food,
energy
and
vehicle
prices.
Finally,
the
Dallas
Fed
trimmed
mean
PCE,
which
throws
out
extreme
readings
on
either
side,
to
3.1%
in
February
—
again
a
ways
from
the
central
bank’s
goal.
A
bright
spot
for
the
Fed
is
that
the
economy
has
been
able
to
tolerate
high
rates,
with
little
impact
to
the
employment
picture
or
growth
at
the
macro
level.
However,
there’s
worry
that
such
conditions
won’t
last
forever,
and
there
have
been
signs
of
cracks
in
the
labor
market.
“I
have
long
worried
that
the
last
mile
of
inflation
would
be
the
hardest.
There’s
a
lot
of
evidence
for
a
non-linearity
in
the
disinflation
process,”
said
Furman,
the
Harvard
economist.
“If
that’s
the
case,
you
would
require
a
decent
amount
of
unemployment
to
get
inflation
all
the
way
to
2.0%.”
That’s
why
Furman
and
others
have
pushed
for
the
Fed
to
rethink
it’s
determined
commitment
to
2%
inflation.
BlackRock
CEO
Larry
Fink,
for
instance,
told
CNBC
on
Friday
that
if
the
Fed
could
get
inflation
to
around
2.8%-3%,
it
should
“call
it
a
day
and
a
win.”
“At
a
minimum,
I
think
getting
to
something
that
rounds
to
2%
inflation
would
be
just
fine
—
2.49
rounds
to
two.
If
it
stabilized
there,
I
don’t
think
anyone
would
notice
it,”
Furman
said.
“I
don’t
think
they
can
tolerate
a
risk
of
inflation
above
3
though,
and
that’s
the
risk
that
we’re
facing
right
now.”
watch
now