Imposing Inflation

While inflation fell from 6.5% Y-o-Y in 12/22 to 6.4% in 1/23, and core inflation similarly declined from 5.7% to 5.6%, its fourth straight decline, the declines are moderating. Worse, core-services inflation, which excludes energy and is the Fed’s favorite measure, has not declined for 17 straight months and is up 7.2% Y-o-Y. Inflation is migrating to services, and the Fed will surely raise rates 25bps in March and May.