The CPI Report: Anticipate the 4Q24 Surge and 1Q25 Fall

Fed Chair Jerome Powell led the news cycle with remarks a few months ago during his Jackson Hole address. According to the transcript, Powell offered with confidence, “Inflation is now much closer to our objective, with prices having risen 2.5 percent over the past 12 months. After a pause earlier this year, progress toward our 2 percent objective has resumed. My confidence has grown that inflation is on a sustainable path back to 2 percent.”

Reading closely, he told the markets, investors, consumers, and businesses, “…now much closer…[a]fter a pause…progress toward our 2 percent…resumed…on a sustainable path back to 2 percent.”

Consider in your mind’s eye how you expect CPI’s “sustainable path” to appear as it proceeds from 2.5% to 2.0%.

Yet it was clearly visible in the data that the reported inflation rate during the fourth quarter of this year is likely to reverse and surge to near or above 3%. By the way, it’s also clear from the data that the first quarter of 2025 should restore the downward trend in inflation. Let’s discuss the likelihood of an upcoming surge and fall in the reported CPI inflation rate.