Inflation Is Coming Down & Fed Needs To Act

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To investors,

The March CPI report was published this morning. As I have been predicting, inflation is crashing. The headline inflation number dropped from 2.8% in February to 2.4% in March.

Core CPI inflation fell below 3.0% for the first time since March 2021. And even the weird “supercore CPI”—a specific measure of inflation that zooms in on the prices of services, excluding food, energy, and housing costs—dropped -0.24% month-over-month. That is the lowest number we have seen for the metric since May 2020.

According to EndGame Macro, “Supercore CPI MoM (circled) is collapsing that’s a clean signal of demand-side weakness across sticky services, especially discretionary buckets like travel, recreation, and healthcare. That supports the “disinflation is real” narrative.”

The prediction that inflation was dropping aggressively was easy. You could see it clearly in Truflation’s measurement, which is a real-time alternative inflation metric. Today the Truflation reading is at 1.3%, which is more than 50% lower than it was in December 2024.

Maybe the most important part of this slowdown in inflation is the structural change that seems to be underway. Heritage’s EJ Antoni writes the “average annual inflation rate from '09 until '21 was 1.8%, then Biden drove it up to 8.6% for a year and a half, then it rose steadily at 3.1% for the rest of his term; but now Trump is averaging a mere 1.0%.”

The current administration has only been in office for a few months, and there is still a long way to go in their term, but this material change to inflation is a welcomed development.

Remember, the last 5 years has been brutal for the average American. Charlie Bilello lays out the numbers for various goods or services:

• CPI Medical Care: +12.4%

• CPI New Cars: +20.9%

• CPI Shelter: +26.8%

• CPI Food at home: +27.5%

• CPI Food away from home: +30.4%

• CPI Used Cars: +33.5%

• CPI Electricity: +34.2%

• CPI Gasoline: +35.1%

• CPI Transportation: +36.7%

• CPI Gas Utilities: +49.2%

• CPI Fuel Oil: +50.8%

• US Home Prices: +52.3%

• CPI Auto Insurance: +53.7%

• CPI Dozen Eggs: +308%

And those are just the official government metrics. The true damage is probably even worse. So the good news is inflation is falling. The risk is that the Fed refuses to act in a timely manner, which leaves the economy exposed to a potential economic slowdown.

We should all hope an interest rate cut is on the way. Have a great day. I’ll talk to everyone tomorrow.

- Anthony Pompliano

Founder & CEO, Professional Capital Management

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