Episode summary
The Fed Has an Inflation Problem (Ep. 149)
Facts vs Feelings
· · Hosts: Ryan Detrick, Sonu Varghese
Summary
The episode argues that inflation is still running hot enough to complicate the Fed’s path to rate cuts, even though the latest CPI report was not as bad as feared. The hosts point to headline CPI at 0.2% month over month and core CPI at 0.32%, then contrast that with producer prices, which jumped 0.9% versus 0.2% expected. Their broader case is that tariffs are contributing to higher goods prices, but the bigger concern is services inflation, especially restaurant meals, dental care, pet services, and other sticky categories.
They also stress that the labor market is cooling without looking recessionary. Layoffs remain contained, hiring is weaker, and travel-related prices like hotels and airfares have softened, but demand is still visible in everyday spending. The Fed, they argue, is stuck between easing into still-elevated inflation and not overreacting to slower jobs data. They expect a September cut is likely, but they are less aggressive than market pricing and think the Fed may only deliver about two cuts this year.
On markets, they argue the S&P 500’s strength is still being driven mainly by earnings growth and margin expansion, not just multiple expansion. That helps explain why stocks remain near highs despite anxiety about inflation, tariffs, and the Fed.
Key takeaways
- The hosts say CPI was cooler than feared, but core inflation is still running too hot to declare victory.
- They argue PPI surprised sharply to the upside, with wholesale food and services pressures feeding into the Fed’s preferred PCE measure.
- The hosts think tariffs are real inflationary pressure, but mostly as a one-time pass-through rather than a new permanent inflation regime.
- They say restaurant, dental, and pet service inflation suggest demand is still firm enough to keep services prices elevated.
- They expect a September rate cut is still likely, but they are below market pricing and think two cuts for 2025 is more realistic than three.
Notable quotes
“the Fed has bit of an inflation problem. Look, to be clear, I don't think the inflation problem is anything close to their inflation problem in 2021 and 2022”
“Headline inflation, headline CPI was up 0.2%. That's 2.4% annualized pays. last three months it's 2.3%”
“core goods prices should be going down. That's what it's done for 25 years except for that brief period in 2021 and 2022”
“we are seeing some level of inflation. Prices are going up for core goods. That's because of tariffs”
“So we have bit of an inflation problem. And I think one thing that underlines this now this will resonate with you”
How the episode opens
Welcome to the Facts Versus Feelings podcast. I'm your host Ryan Dietrich and I'm joined by my co-host Sonu Vargis. Cutting through the noise in 30 minutes each week with Ryan Dietrich, chief market strategist and Sona Vargis, VP global macro strategist.
Taking out the boring and helping investors focus on what really matters. A quick note before we start the show. Investment advisory services offered through CWM LLC, an SEC registered investment adviser.
Carson Partners, a vision of CWM LLC, is a nationwide partnership of adviserss.
Sonu, there's a new Taylor Swift album coming out. I know you're excited. — Were you aware of that? Did you need Did you see that? Yeah, — I have to say I was, you know, believe it or not, because I have an 8-year-old daughter now.
Yeah. Yeah. — Who is totally into Taylor Swift and her boyfriend — Who I goodness I forget the guy's name. This is some NFL player. — Okay. So, not your daughter's boyfriend. We're talking about Taylor Swift's boyfriend. Taylor Swift. — That would be Travis Kelce. He plays in something called the NFL. It's American football. The Chiefs are in the AFC. See, everybody, Sonu, smartest guy I know, but when it comes to football, we really got to dumb it down for Sonu.
My My daughter's going to make me watch football now on Sundays. Yeah. Well, that's good for you. — I learned that she's got a new album. — Mhm. — Something. I forget the name, but — Who knows? Who knows? But yeah, we we playfully joked at the end of 20122, how in the world can you have a recession when Taylor Swift is coming out the summer of 23 touring all over the place, a roaming Super Bowl, if you will.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed rate cuts
- inflation data
- cpi and ppi
- jobs slowdown
- market resilience
Watch the episode
Watch “The Fed Has an Inflation Problem (Ep. 149)” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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