Good morning, investors. Another inflation report, another downside surprise.

Economists being wrong has become more reliable than almost any other indicator over the last year, and that streak continued with the latest CPI data.

Let’s dive in.

Inflation keeps cooling but markets still don’t expect a rate cut this month.

The December CPI data extended the disinflation trend, yet did little to change expectations for Federal Reserve policy.

Investors, in effect, believe price pressures are no longer a concern but they aren’t fading fast enough to force the Fed’s hand.

The headline number came in at 2.7% year-over-year, the same level as November.

On a core basis, which excludes food and energy, the Consumer Price Index rose 2.6% from a year ago — below expectations and the lowest since 2021.

The reading came in below estimates for 62 of 73 economists surveyed by Bloomberg, as Geiger Capital noted, reinforcing the idea that inflation has largely come under control over the last several months.

To be sure, the data could be somewhat clouded by technical quirks and gaps from the government shutdown.

Indeed, the Bureau of Labor Statistics made assumptions in recent releases that complicate month-over-month changes in the numbers.

Still, some investors argue that it’s long been time to move on from inflation concerns.

Jay Hatfield, CEO of Infrastructure Capital Advisors, said the data has been good enough for months.

“Inflation at 2% to 3% is totally fine,” Hatfield told me on Full Signal. “It’s actually probably better for the middle class there because you get higher nominal wages.”

The most important macro inputs, he said, are moving in the right direction.

“The money supply is shrinking and oil prices are down, so we’re bullish on inflation,” Hatfield said.

Fed officials, for their part, are less eager to move on.

At least in the eyes of investors, inflation no longer appears to be a major threat.

If the Fed doesn’t cut rates this month, asset prices can still fall back on steady earnings to march higher.

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📉 JPMorgan stock fell after missing earnings. Shares finished trading 4.1% lower after the bank’s profits fell 7% in the fourth quarter, dragged by a surprising dip in investment banking fees. (WSJ)

🏦 The Supreme Court’s case on Fed Governor Lisa Cook begins next week. Justices will begin hearing arguments on January 21 related to President Trump’s effort to fire Cook, which comes on the heels of the new inquiry into Fed Chair Powell. (CNBC)

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I sat down with Jay Hatfield, the CEO of Infrastructure Capital Advisors and a veteran portfolio manager and Fed-watcher, to discuss the drama at the Federal Reserve, the monetary policies that have hurt affordability, criticisms of Jerome Powell, and more.

Tune in on YouTube, Spotify, or Apple Podcasts.

🗓 January 14, 2022: US stocks tumbled after investors repriced aggressive Fed tightening, with markets rapidly positioning for the fastest rate-hike in history.

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