Inflation Surges Higher The Fed is Now Trapped

The CPI inflation report was released this morning, and inflation came in raging hot, and U.S. consumer sentiment is now plunging. So I want to give you the highlights. So the CPI inflation report says that inflation is now running at a rate of 3.3%, and they're saying that core inflation is at 2.6%. Okay, listen, I just want to say this. If you're looking at the inflation rate, it's 3.3%, that might not seem like a high rate of inflation, however, what's concerning is the acceleration of the rate of inflation. Because in February, we're at 2.4%, and then in March, it just spikes up to 3.3%. That is a spike. And you have to remember that the goal of the Federal Reserve is to get the rate of inflation down to 2.0%, and we're far from it. So back in February, 2.4%. Yeah, sure, we're close to 2.0%, but now this is a major setback. Now, I want you to take a look at this to see how problematic the situation is. So look at the CPI month-over-month change. I'm not trying to exaggerate the situation. You can see the numbers for yourself. It's accelerating at a rate of 0.9% a month. That is terrible. And I just want to point this out to you. With energy prices surging, and with all this inflation going on, what's happening is that inflation is going up faster than wages. For the month of March, real earnings went down by 0.6%. And as I've been saying, our purchasing power continues to erode. And I just want to say this. I do not expect energy prices to quickly return back to how it was back in February. So this is a one-year chart, and this is the price of oil. And we're still at $96 a barrel. This is for WTI oil. So we were below $60 a barrel for quite some time in the recent past. And I know that we have a ceasefire with a few days remaining. And of course, it's a fragile one. And we don't even know if it's going to last the full two weeks. And then after two weeks, what's going to happen next? You know, not to mention that due to the toll in the Strait of Hormuz, oil is going to become more expensive. And that additional cost is going to be passed down to consumers, you know, making energy prices more expensive. And also the energy infrastructure in the Gulf has been damaged. And those damages, they cannot be repaired very quickly, which means that there's going to be less supply of oil. And we can't forget about the natural gas, the fertilizers, the chemicals, the metals that come out of there, that transit through there. And then we take a look at the average price of gasoline in the US, and they're still elevated. As of today, the national average is at $4.15 a gallon. A year ago, gasoline was at $3.22. This is a national average. The average in California right now is $5.91 a gallon. I'm sure that in certain cities within California, it's more expensive. And I want you to take a look at diesel fuel. So it's currently at $5.68 a gallon. That's the average in the US. It's $5.68 a gallon. And if we have higher diesel fuel prices, then it's going to cost more money to farm, to mine resources, to ship, to make products, to also deliver. And of course, that's going to accelerate the rate of inflation. So I'm telling you, like, it's bad right now, but it can get a whole lot worse if there's no true de-escalation. And with all this going on, it's no surprise that consumer sentiments has now hit a record low. And to emphasize, it's not just low or lower, I'm talking about a record low. So this reading was conducted in April. So this is the most recent one. The expectation is that consumer sentiment will improve after energy prices decline from a resolution in the Mideast. But again, when is that going to happen? And also, I want to show you this. I want you to know that there's not going to be any relief from the Federal Reserve anytime, not anytime soon. So I want to show you the odds of an interest rate cut by the Federal Reserve. After the CPI Inflation Report was released, here are the new updated odds. And this is coming from the CME FedWatch tool. There is now a 98.4% chance that the Federal Reserve will not change interest rates at their next meeting on April 29th. There's a 1.6% chance that they're going to raise interest rates and a 0% chance that they're going to cut interest rates. In my opinion, for this April meeting, they're not going to raise interest rates. Consumer sentiment is already at a record low. The GDP revision came in lower. In this type of environment, with all this going on, we cannot raise interest rates. And how can they cut interest rates in the face of spiking inflation? So they're not going to change rates. It's because they're trapped. And then the next Federal Reserve meeting is going to be on June 17th. And this is actually going to be chaired by President Trump's new Fed Chair. And even with Warsh in charge of the Federal Reserve, the market expectation is that there's a 98.3% chance that they're not going to change interest rates by that June meeting, a 1.7% chance that they'll raise interest rates, and a 0% chance of an interest rate cut. All I'm saying is, I mean, I already see this coming. Just be prepared for President Trump to be very upset. But I mean, Warsh is going to have his hands tied. What can he do? He still may cut. That's not impossible. We never know. But these are the odds as of today. Okay, I just want to show you one more meeting. This is the July 29th meeting. And it's not much of a difference. Overwhelming odds that they will not change the interest rates. A 96.2% chance that the rates are the same by then, a 1.6% chance that they'll raise interest rates by that meeting, and a 2.1% chance that they'll cut rates by that meeting. Now, I just wanted to keep in mind that this meeting in particular is three and a half months out. A lot can change by then. But I want you to know that the changes, it could be for better or worse. We'll see how the whole situation develops. But regardless of what they do with interest rates, I want you to know two things. So the first thing is that the M2 money supply, it continues to expand. So this is straight from the Federal Reserve's website. We are at a record high for the money supply. And it's just, well to me, it's just common sense that if there's more money out there, then obviously prices are going to continue to inflate. And I just want to zoom in for you. This is the M2 money supply over the past 12 months. It has consistently been going up. And if you notice over the past two months, it's actually been accelerating. And here's the Federal Reserve's website as well. So I went into more details on this in my previous video, but the new figures came out about two days ago. And yes, the Federal Reserve is currently printing approximately $40 billion a month, which is of course inflationary. So ultimately, sure, the Fed may not cut interest rates, cutting interest rates is inflationary. However, they're still printing money and expanding their balance sheet and the M2 money supply is growing. Now, if you've been following along for a while, what did I say back in 2024 and 2025? I said that they're going to turn the money printers back on in early 2026. And I was wrong. They started in December of 2025. So they started a little bit earlier than I expected. And I also said that we'll see an acceleration of inflation in 2026 with the brunt of it occurring in the back half of 2026 and 2027. Now, it is my prediction that sooner or later, they're going to have to accelerate the money printing. Because again, we cannot afford a recession. We cannot have liquidity problems. It doesn't work in our debt bubble environments. And another thing is that a lot of people have been asking me whether this is the manufactured crisis that I predicted in my Great Melt-Up series. And to that, I'd say that it's just too early to tell if that's the case or not. But regardless, I expect an acceleration of money printing. And that's going to lead to more devaluing of the dollar, more inflation, and of course, more wealth inequality. Look, I just want you to know that from my perspective, how they're going about this, the Federal Reserve, the government, what they're doing, this is just textbook stuff. You know why? It's because the Federal Reserve is cornered. And what are they cornered by? It's the debt situation. Like, I hate to be a Debbie Downer, but you know what? It's the truth. Like, I apologize for being blunt, but I'm not going to apologize for being honest. Okay, so that's your inflation update for today. I know that's not the happiest news or what you want to hear, but I do wish you a very nice weekend. Please take care.