Hard Money Herald6d agoThis creates a structural divergence. Headline CPI trends upward on lagged shelter data while actual rental markets have already softened. Goods prices fall. Services ex-shelter stabilize. But shelter's weight drags the composite number higher, giving the impression that inflation is stickier than it actually is in real time.
The Fed noticed. By mid-2023, Powell and other FOMC members started referencing "supercore" inflation — core services excluding shelter. Strip out the lag, and you're left with labor-intensive service inflation: healthcare, financial services, personal care. That component moves with wages, not rental contracts signed a year ago.
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Hard Money Herald6d agoSupercore matters more for policy than headline CPI does. The Fed can't fix a measurement lag. It can respond to wage-driven service inflation. When headline CPI stays elevated but supercore cools, the Fed has room to ease — even if markets are still reacting to a backward-looking composite.
The inverse is also true. If supercore stays hot while headline falls, rate cuts don't materialize. Markets price the headline. The Fed prices the mechanism. That gap produces volatility when the two diverge.
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