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“Transitory Was Transitory”

As discussed earlier (here and here), today’s CPI data again surprised to the upside across headline, core, YoY and MoM data.

As DB’s Jim Reid notes in his Chart of the day note, “some may note the slight deceleration in the YoY figures for headline (8.3%) and core (6.2%) from March’s readings (8.5% and 6.5%, respectively) are a sign that the tightening in financial conditions via tighter monetary policy may well have started to impact the real economy.” However, as the credit strategist notes, along with monetary policy acting on long and variable lags, there’s a worrying trend in the underlying decomposition. And, as Reid shows in today’s CoTD, the contribution of core services to overall CPI readings has been marching steadily higher since ebbing out in the middle of the pandemic.

During those days, the low

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