BREAKING INFLATION REPORT Is WORSE Than YOU THOUGHT...CPI

The April CPI report just dropped, and Wall Street is already trying to explain it away as “just energy.” But that misses the bigger problem. Energy prices are surging, gasoline is up sharply, airline fares are getting hit by fuel costs, and shelter inflation is accelerating again. That means this is not one inflation problem — it’s two separate problems happening at the same time.

Mark Malek breaks down why the Fed is trapped, why rate cuts are looking less likely, and why the shelter problem may be the inflation story nobody on financial television wants to lead with.

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Transcript

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Okay, here's your CPI bomb blast for today. Guys, they told you inflation was coming down, but they were wrong. And this morning's number just made it official. By the end of this video, you'll understand exactly what's in the April CPI report that dropped just this morning. Why the headline 3.8% is only half the story, and why two inflation problems buried inside that number have absolutely nothing to do with each other, which means they cannot be solved by the same tool. If you're a homeowner, a borrower, a traveler, or anyone who pays rent in America, this report is about you. So you better pay attention. Let's get into it. The Bureau of Labor Statistics dropped April Consumer Price Index, that's the CPI, at 8:30 a.m. Wall Street time, just a few minutes ago. Headline, 3.8% year over year. The highest annual inflation reading, guys, since May of 2023. The monthly read, that was up six tenths of a percent. And the consensus across every financial network this morning was swift and predictable. It's energy. The war, the straight, strip out energy, and it's all just fine. Well, here's the problem with that consensus. It is partially true, which makes it more dangerous than if it were completely wrong. Now, yes, energy was the single largest driver. No surprise there. The energy index rose 3.8% in April alone. Over the last 12 months, energy is up 17.9%, and gasoline is up, no surprise, 28.4%. The energy component accounted for more than 40% of the entire monthly increase. The people saying it's an energy story are not really wrong. They're just not finished reading the report. That's always the case, isn't it? Because there are two other things in this morning's data that tell a completely different story. And they have nothing to do with the strait of hormous. So, guys, if you like this type of content, please click like and consider subscribing. It's important to be in the know. We hope that you would do it with us. Let me walk you through the energy story first, because most people think they understand it, and most people understand only half of it. When energy prices rise, the first place most people look is, of course, the gas pump. Gasoline is up 28.4% year over year, and it's a real and direct hit on every American who drives a cart. That is the visible part, the part you feel when you swipe your cart at the pump, or even if you just drive by the gas station and see the big signs out front. But energy doesn't stop at the gas pump. It doesn't respect the boundary between goods and services. And this morning's report showed that in a way that should make every American who has bought an airline ticket recently stop and pay very close attention. Airline fares are up 20.7% year over year. 20.7%, guys. If you flew somewhere for$500 last year, that same ticket is now going to run you around$600. I did the math for you, so you don't have to do it. And that's not airline greed, guys. It is jet fuel. When crude oil spikes, the cost of flying every passenger on every route in America goes up along with it. Airlines pass through that cost directly to us every single time. Every time. They have no choice. This is what economists call energy pass-through. The gas pump is the visible tip, the airline ticket, the trucking surcharge, the higher price at every business that heats, cools, or ships anything. These are the iceberg below the surface. Energy inflates in every sector that touches it, which is to say, every sector. And the full pass-through from an oil shock of this magnitude, guys, takes six to 12 months to work through the system. We're still in the early innings. Now, here is where I need you to lean in a little bit, and I'm going to slow it down because this next part of the report is the one that nobody is leading with on financial television right now. And I've been watching, and it's the one that matters more for your long-term cost of living. Shelter. The shelter index rose six tenths of a percent in April. That is the second consecutive monthly increase. You could probably see the yellow chart over there behind me on my screen. Shelter is now up 3.3% year over year. And I want to be precise about why this is a fundamentally different problem from the energy number, because they look similar in a chart, but they're not the same animal at all. Energy prices are volatile. They go up with geopolitical conflict and they come back down when conditions change. And they will. That is why the Fed uses core inflation, which strips out food and energy, which interestingly we all need to buy to survive and get to work anyway. But that is a topic for another video. Well, they do it, guys, to measure underlying pricing pressure without the volatility. Core CPI this morning came in at 2.8% year over year and four-tenths of a percent month over month. The Fed's target is, in case you forgot, 2%. Core is running 40% above target, and shelter is a significant reason why. Shelter doesn't work like energy, guys. Once rent rise, well, in case you haven't noticed, they tend to stay risen. Owner's equivalent rent, that's BLS's estimate of what a homeowner would charge to rent their own home, is the stickiest component in the entire CPI basket. And it has been. It's been a big problem. Excuse me. It's the number that the Fed watches most closely to determine whether inflation is truly cooling or just fluctuating. In March, shelter rose five tenths of a percent. In April, shelter rose six tenths of a percent. That is two consecutive months of acceleration. It's not a blip, that's a directional signal. And it's happening for a reason that has nothing to do with Iran. Mortgage rates are still above 7%. Homeowners with 3% mortgages won't sell because they can't afford to buy something else. So they stay put. The lot that that locks out, that locks supply out of the market. And people who want to buy can't afford it. So they stay renters. Rental demand stays elevated and rents they keep rising. The locked-in homeowner problem and the rental demand problem are feeding each other at this point. And the Fed's rate policy has not resolved either one. Now, here's the structural trap this morning's report reveals. And the reason that the new Fed chair, Kevin Warsh, is walking into one of the hardest monetary policy environments in a generation. Guys, I've been doing this for 35 plus years, and I've been watching the Fed closely. This is a very unique challenge right now. You have two inflation problems running simultaneously. Problem number one is, as you might guess, energy driven. It's volatile, it's geopolitically sourced. And in theory, it's self-correcting if the straight situation resolves. Ultimately, it will resolve itself. Raising rates does not lower gas prices, so the Fed waits it out. Problem number two is well, shelter. It's structural, it's sticky and completely unrelated to oil or Iran. Shelter requires either rates to come down or housing supply to surge. And guess what? In case you haven't noticed, neither is happening quickly. The tool for fighting problem two, lower rates. It risks letting problem number one run hotter. The tool for managing problem number one, staying put, makes problem number two worse. This is not a comfortable place to stand, guys. And it's exactly where Warsh is standing on his first week on the job with this morning's data as his welcome gift. Now, here is what I want you to watch shelter for a third consecutive monthly increase. Because if we get three in a row, the disinflation narrative needs to be completely rebuilt from the ground up. Airline fares and core services for continued energy pass-through, that's another thing to watch. And of course, Warsh's first press conference for any signal for how he is weighing these two separate problems against each other. The June rate cut that markets were pricing in last week is looking considerably less likely this morning. The bond market already knows it. You see yields climbing slowly. The market wanted a report that it could explain away with one word energy. It wished. It didn't get one, unfortunately. It got an energy story with a services problem attached, and a shelter story underneath both of them that has nothing to do with energy or Iran at all. Three layers, one report, zero answers. So your truth bomb for this morning is the April CPI is not one inflation problem. It's two. And the one that'll be here after the Strait of Hormuz opens is the one that nobody on television is leading with this morning. Guys, join me every day for Wall Street Truth Bombs, where I drop them right here before the market figures. Every day the headlines move the markets, but the real story is in the shadow data. That's why every Thursday at 4 30 p.m. Wall Street time, we go live with the radar report. We break down what's actually driving the markets: inflation, Fed policy, oil, housing, credit risks, liquidity, and the biggest macro stories Wall Street is watching right now as we speak. No spin, no narratives, no politics, just policy, just real analysis designed to help you understand the risks, the opportunities, and what could happen next. I'm Mark Malik, founder of Truth Bombs, and this is where we connect the dots before the rest of the market even catches on. Join us live every Thursday at 4 30 p.m. EST Wall Street Time for the Radar Report.