The US inflation has fallen overnight by 0.3 percentage points. Not a single price has decreased because of this. The calculation method has changed, retroactively to 2021. For July, the US statistics agency previously reported a core inflation of 3.3% (excluding energy and food), now it shows 3.0%. For August, 3.0% was recorded, although economists had expected 3.3%. On paper, this is a clear decline. Three areas were adjusted: software, legal consulting, and asset management. The last one best illustrates the problem. An advisor charges a 1% fee on your portfolio. If the stock market rises by 20%, you pay 20% more in dollars, even though he has never raised his rate. Statistics had previously counted this as a price increase. In May, this inflation was at 21.6%; using the new method, it would be 14.3%. The Canadian bank RBC estimates that the new method alone pushes core inflation down by about 0.18 percentage points, mainly due to software. A large part of today’s decline is thus purely a matter of calculation. Even on Wall Street, the number is read cautiously. BNY strategist John Velis advises treating any softer value after the adjustment as a statistical correction. His conclusion: less noise, the same amount of inflation. Why this matters: Two weeks ago, the US Federal Reserve raised interest rates for the first time since 2023 to 3.75% to 4.00%. 16 out of 18 members expect another increase this year. This inflation figure is what decides that and it impacts credit rates, mortgages, and the direction of stocks and Bitcoin. On paper, inflation has decreased today. At the supermarket checkout, however, no one notices anything. If you are interested in such macro insights and they help you, feel free to interact with the post. 🧡 (translated)
