Are The Government CPI Inflation Numbers Now A Hoax? (How The Calculation Changed)

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Last week the US Bureau of Labor Statistics reported that the annualized Consumer Price Inflation (CPI) rate went up 2.7% over the last year, a decrease from the 3% reading in October.

Do you believe that this inflation number is real?

Do you believe that consumer prices are falling?

Now economists expected the number to be closer to 3%, because we were seeing many CPI prints right around that level, mostly above it. However, this number came out after the US Federal Government shut down for several weeks, causing weeks of economic data to not be recorded.

The three percent level is an important level, because last year the Federal Reserve, with statements from Chairman Jerome Powell, was predicting that the CPI inflation rate would fall down to 2%, thereby allowing him to make multiple interest rate cuts in 2025 in the first half of the year.

Instead, the CPI went down and then back up to 3% and the Federal Reserve did not lower rates until this September. The Federal Reserve has a mandate to keep inflation under control, with a 2% CPI target level, so when the CPI is around 3%, and there is no recession, and the stock market is near all time highs, with a historic valuation level, it becomes difficult to make an argument that there is any justification for interest rate cuts at all.

In fact, as you can see from this chart, the CPI actually had been ticking up from April into September, and the Fed lowered rates anyway.