The Fed's preferred inflation gauge came in at 3.3% annually. Economists surveyed by Dow Jones said it would hit 3.6%. They missed by thirty basis points, which in normal human terms means they were completely f*cking wrong about the thing they get paid six figures to predict.
Imagine your job consists of one task. You guess a number. You have spreadsheets. You have models. You have PhD students doing the actual work. The number comes out once a month. You've seen it come out for years. And you still whiff by a full percentage point on a figure that moves the entire market.
Retail traders saw this headline and immediately checked their portfolios. Some bought calls. Others bought puts. A few bought both because they read about straddles on Reddit and thought it sounded professional. All of them will lose money, but not because they predicted inflation wrong. They'll lose money because they think inflation predictions matter.
The core PCE rose 0.1% monthly, which the economists also predicted, so they went one-for-two like a Little League player who gets a participation trophy. The annual number is what everyone freaked out about. It's lower than expected, which means inflation is cooling faster than anticipated, which means the Fed might cut rates sooner, which means absolutely nothing to your portfolio because by the time you react to this information it's already priced in and you're already too late.
Somewhere right now an economics professor is explaining to his students why the models were off. He'll use terms like base effects and seasonal adjustments. He won't mention that predicting inflation is astrology for people who can't admit they're doing astrology.
The Dow Jones survey exists so financial media can write headlines with the word "expected" in them, which makes it sound like someone knows what's happening.
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