The March Consumer Price Index (CPI) data was hotter than expected, with a reading of 3.8% against analyst expectations of 3.7%. This surprise sparked market volatility, with stock futures falling and expectations for Federal Reserve rate cuts being adjusted and priced out.

However, Yahoo Finance's Rick Newman joins the Live Show to discuss a potential silver lining in the CPI print: the goods inflation figure.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Angel Smith

Video Transcript

JULIE HYMAN: Inflation down from its peak in 2022. But it's been rather stubborn so far in 2024. This morning's hotter than expected CPI print weighing on markets and pushing out expectations for the Fed's timing on rate cuts. But it's not all bad news. Yahoo Finance's Rick Newman joining us now with the silver lining in this report. What was it, Rick?

RICK NEWMAN: Goods inflation, stuff, products. Goods inflation was only 0.6% year-over-year. And it has been below 1% for the last six months. So we're basically inflation in goods has disappeared.

Now, a lot of people will complain and say, yeah, but many of those price increases that happened over the last two or three years, those are still there. And that is mostly true. Although there are some things that are actually declining in price.

We have seen declines in the cost of used cars and trucks, for example, electronics going down a few other things in the 28 categories. I've been tracking since 2021. But the other good news here is that in earnings are now rising by about a little over 4% and compared with goods inflation at just 0.6%. That means people are catching up.

So the paycheck, the typical paycheck buys more in terms of products. And this basically coincides with everything we know about why goods inflation got as high as it did. Anyway, the peak was 14.2% year-over-year. And I think that was in 2022.

And we know why that happened. I mean, it was the COVID supply chain, snafu as it was everybody was stuck at home ordering stuff from Amazon and Walmart online. There wasn't enough stuff. So naturally, prices went up.

Well, that has basically reversed. So we basically only have two types of inflation left where we're trying to solve this problem. One of them is rent, which counts as a service. And then the other one is a real outlier that we've been talking about a little bit lately, which is auto insurance up 22% year-over-year. So those are the two problems we have to deal with now. Everything else is basically falling into line.

JOSH LIPTON: Rick, another metric that stood out to me, though, was it was gas prices, Rick. I mean, that really helped drive this higher than expected print we got. It's hard to imagine another data point, Rick, that has such an impact on how people feel about the economy, and inflation, and the signs they see at the local gas station. What did you make of that?

RICK NEWMAN: I mean, gasoline is erratic. We know that that's why it's not included in the so-called core inflation measure. This doesn't tell you anything about what's happening in the economy. The Fed, I don't think worries that much about gasoline prices at least at the levels they're at now.

I mean, look what's pushing up gasoline prices lately. It's not anything about the economy. It's a war between Israel and Hamas.

It's a group nobody ever heard of. Until six months ago, called The Houthis in Yemen that are trying to sink cargo ships in the Red Sea. And that just follows what we've been seeing in oil prices now close to $90 a barrel.

Now, if you're President Biden, all of this matters a lot because gasoline, of course, it's less than 3% of what the typical family spends every month. But it just has an outsized effect on confidence. And these numbers are not going the right way for President Biden.

I mean, I'm sure he wished that by now, the inflation rate would be getting close to what the Fed wants at 2%. And it's not. It's going the wrong way.

And Biden is not going to get the interest rate cuts that he would really love. It looks like in June or perhaps not at all in the first half of this year. So they might come later in the year.

But there's a growing chance. There won't be any rate cuts this year as we've been talking about all day. So that's heartache for President Biden for sure.

JOSH LIPTON: Rick, thank you. Appreciate it.