ISMS 10: US CPI Could Decline to 4% By YE23; Unless QE Revs Up

<h2>Is US CPI going up or down by yearend 2023?</h2><h3>Feb 2023 US CPI was 6%, down from 6.4% in Jan and off its June 2022 peak 9.1%</h3><h3>Food accounts for 13.5% of CPI and was a high 9.5% in February</h3><h3>Food has come off its Aug 2022 11.4% peak</h3><h3>Energy accounts for 7.1% of US CPI and was up only 5.2%</h3><h3>Energy has come down considerably from its 41.6% June 2022 peak</h3><h3>When oil price rises, it causes a similar, but muted rise in the US CPI energy component</h3><ul><li>Correlation between oil price and the energy component of CPI is about 90%</li></ul><br/><h3>Food and energy are a tiny part of US CPI, 79% of the weight comes from all other items</h3><h3>Non-food and energy items are less volatile and total CPI is coming back down to that level</h3><ul><li>This less volatile and slow to adjust group of products and services illustrates why I was previously arguing that overall CPI was unlikely to come down fast</li></ul><br/><h3>Most volatility in US CPI comes from the energy component, which accounts for only 7% of CPI</h3><h3>The largest impact on the food category is “Food at home” which was up 10.2%</h3><ul><li>This is coming from supply chain pressures that take a long time to work through</li></ul><br/><h3>Though high, food at home peaked in August 2022’s 13.5% high and has fallen 3ppts</h3><ul><li>Food away from home never was exceptionally high and as a result is slowly falling</li></ul><br/><h3>Energy is 7% of US CPI and is broken equally into commodities related and services</h3><ul><li>Commodities is related to the oil and gas that Americans buy</li><li>Energy services show how energy costs feed into the price of electricity that individuals and businesses pay</li></ul><br/><h3>Gasoline prices were the main driver and at its peak in Jun 2022 was up 60%</h3><ul><li>Biden’s first drawdown of emergency oil stockpiles from the Strategic Petroleum Reserve was in November 2021, just before the election</li></ul><br/><h3>In 2022, Biden released 222 million barrels of oil from the Str