Yesterday’s CPI report was seemingly the last hurdle for the Fed to cut interest rates. With the CPI index matching Wall Street forecasts, the Fed Funds futures market now implies a 97% chance the Fed will cut rates next Wednesday. The data was OK but elicits fears that the downward price progress has stalled.

The CPI rate was 0.3%, a tenth higher than last month. The year-over-year rate rose from 2.6% to 2.7%. Core CPI was +0.3% monthly and +3.3% annually. The graph below shows that the Core CPI (excluding food and energy) has run at .3% monthly for most of the last year after falling precipitously over the prior two years.

While the trend appears to be stalling, some data leads us to believe it is only a matter of time before it declines. For one, CPI

From 2010 through 2022, the US Energy Information Administration (EIA) calculates that global oil demand grew by 10 million barrels per day (Mb/d). Over 60% of the demand growth was due to China’s phenomenal economic growth. For context, American demand increased by less than 10%. The graph below shows that China once drove global oil demand, but that is no longer true.

Given the impact oil prices have on inflation, this is an essential macroeconomic factor to consider over the next five to ten years. Furthermore, a report by China’s national oil company, China National Petroleum Corporation, says China’s demand for oil could peak next year—five years before they had expected it to plateau. The EIA expects a similar peak, with demand from China only growing by