Michael Gapin

There is some catch-up effect here on rents and owner's equivalent rent from the government shutdown last fall.

So this number is artificially higher because of that, but you still have kind of what I'll call a trifecta here.

You have energy prices pushing the headline,

We think we have the last vestiges of tariff pass-through on core inflation, core goods.

You saw the apparel number today.

And then we had that catch-up effect on shelter inside of services.

So three forces pushing inflation in this particular CPI reading higher this month.

You still have kind of what I'll call a trifecta here.

You have energy prices pushing the headline.

We think we have the last vestiges of tariff pass-through on core inflation, core goods.

You saw the apparel number today.

And then we had that catch-up effect on shelter inside of services.

So three forces pushing inflation in this particular CPI reading higher this month.

Well, there's some hints of second round effects of higher energy prices on core.

So those airline numbers, the food at home numbers, there's also kind of spillage into headline through food because a lot of food prices are related to transportation costs.

And so the concern here, the assumption here, I think from the Fed's point of view and ours,

is that oil prices tend to give you headline effects but not core effects and there's at least at the moment given the magnitude of the rise in energy prices some hints of those second round effects in core we need to see if those persist and that's michael gapen with morgan stanley core cpi was boosted in part by a statistical quirk in the report's measure of rents resulting from the 2025 government shutdown

You certainly ask interesting questions.

Thanks for having me on.

Well, as you noted, the decision to stay on hold was widely expected.