When comes the Powell pivot? Welcome to the real real real real vision daily briefing. It is Thursday, November 10th, 2022. I'm western act more real visions global markets editor based in Tokyo. And I'm joined today with a very special guest. Mr. Michael Howell. He's the CEO founder of cross border capital.

But before we get started, we also have addressed Stano Larson, who I have interrupted in his vacation in paradise to just walk us through CPI and the market price action. So, Andreas, you look slightly warmer than you are usually when I talk to you, but thanks for joining us. How are you, man?

I'm good. Thank you. It's a bit warmer than usual for me down here at Cayman, but I'm enjoying it anyway. I would hope so. So, look, we had CPI come out today and, you know, looks like both headline, not that anyone really cares about headline more as core as well, has basically come in below consensus. And we see a massive cross asset.

You know, move. And so can you just walk us through both of those? Maybe let's go through the CPI sort of figures themselves. Is there anything that popped out at you and anything that we can kind of extract away from in terms of monetary policy out of the US?

What a rally we have crossed right about everything today. And I guess the tricker is this CPI report. Obviously, if we look at the details, I've been saying for quite a while that we should expect the prices of goods, so physical goods to either disinflate or outright drop in the coming quarter or two.

And I think if we look a bit beneath the surface of this core CPI print at 6.3% that the goods component is the exact reason why we have a surprise to the downside of expectations for inflation.

The monthly number is around 0.27. So month of month growth below 0.3% in the correlation number. We haven't had such low numbers in summer of 2021.

So I guess this is a biggie for the momentum of inflation overall. And I think that's why we have this material response and markets.

Let's look at the details. I mean, I've been saying that the price of goods needed to drop as a consequence of a reopening of supply chains globally.

We have clearly lower fright rates from China to the West now. That's good news for the price of goods in a negative sense.

We have demand destruction ongoing, a lot of places around the globe, PMIs below 50, right about everywhere you look.

So I think this is a natural consequence of an economic slowdown globally that we see this reaction in goods prices.

But if we look at the price of services, the trend is actually still intact.

The important component of service inflation is the rent of shelter cost. It's up around 0.6% on the month.

Basically, the same kind of trend that we've seen in the shelter cost over the past couple of quarters here, which essentially means that service inflation is still moving up on the trend basis while goods inflation is moving in the other direction.

We have this theme of goods, this inflation or deflation versus service inflation.

And I think when we sort of boil the two trends together, that when the dust settles into next year, a new natural level for inflation is probably above 4% that's at least what my models tell me.

In the light of a stabilized level of inflation of above 4%, the Fed's got a lot of work to do still and we obviously got a lot of Fed members at the wires already.

Yes, indeed, just to put some context in that even before the CPI print came out, we had two Fed speakers who were saying, you know, yes, we.

We were obviously being dovished by any means, but they were being cognizant of doing too much or being aware of potentially breaking something, but however, we have a job to do and that is to get inflation down.

So I suppose that more rate hikes to just keep coming as as of now, and then it'll just be how long they stay up is sort of the takeaway from this one reading, right?

And is there anything that we can really take from this one reading or because you know, one reading is certainly not enough, right?

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