US Market Up/Down after Dec CPI at 6.5% Low ?
As I started penning this post, its almost like a trip down memory lane. How so ?
This is because I have scripted a similar post about 2 months back.
It was to participate in one of Tiger's Community > Hot Topics on US's Oct CPI.
Click here ! to read it if interested. So much have happened since the post.
Original post - https://www.cnbc.com/2023/01/12/heres-the-inflation-breakdown-for-december-2022-in-one-chart.html
Precursor - please read above linked-article and form your own opinion first ok. Thanks.
- Dec 2022's CPI inflation fell faster than expected.
- Month on month comparison, Dec CPI was 6.5% vs Nov CPI of 7.1% vs Oct CPI of 7.8%.
- Excluding Food & Energy; Dec Core CPI of 5.7% vs Nov Core CPI of 6.0%; only slowed in line with forecasts amid stubborn services inflation.
- One CPI index's component that "contributed" to decline was ENERGY. It came in at -4.5 for Dec vs -1.6 for Nov vs +1.8 for Oct.
As I have mentioned back in Nov and I am repeating myself again - the dip in Energy's was largely "managed / controlled" by the Biden Administration by tapping on US Strategic Petroleum Reserves (SPR).
It is public knowledge.
SPR draw down lasted until 31 Dec 2022
US SPR oil supply as of 06 Jan 2023
- Looking at US SPR oil stock supply as of 06 Jan 2023, it stands at 371,580 thousand barrels.
- Backtracing at this level of oil supply, the closest was 25 Nov 1983 at 370,630 thousand barrels.
- A whooping 40 years ago.
- Do not forget, back in 1983 even though stock is considered low by today's standard, consumption was lower as well, relatively speaking. China back then wasn't half as industrious as it is now.
- Never in the History of SPR has supply dipped this low.
How is Oil Price So Far In 2023 ?
Oil price since 02 Jan 2023
- With the endorsed SPR draw down logically ended on 31 Dec 2022
- Taking a look at Oil Price since 02 Jan 2023, it has dipped initially
- In recent days, it has started climbing.
- Without government intervention now, the question is "Will oil price climb back to $100 per barrel or more again ?
Will The Fed Raise Interest By 0.25% or 0.5% or 0.75% ?
- Repeating aloud, the Fed is staying its course to bring inflation back to 2%.
- The Fed is unable to "manage" oil price and the CPI index.
- The effective tool available to the Fed amongst the few instrument is the Interest Rate.
- If Oil price continues to bubble up, it could well be that Jan 2023 CPI may reverse its course & rise from the current 6.5% agree ?
- Mr Powell and his team of merry men / women will have to consider very carefully on the next rate hike - whether to slow down the intensity or start with a 0.75% again in order to prevent the CPI from rising. Agree ?
- No need to elaborate on market's reaction should the next interest hike be 0.5% or worse 0.75%.
- Do you think the Biden Administration will endorse another release of Oil supply from SPR ?
- Do you think the Fed will hike interest by 0.25% or 0.5% or 0.75% ?
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