The Federal Reserve was able to justify cutting last September for many reasons, but most notably for the following:

• Headline CPI ex-Shelter inflation (YoY) was at +1.1%.

With headline & core inflation metrics showing disinflation YoY, as well as the PCE data, and a backdrop of some labor market softness, they had sufficient data to cut.

But what's happened since then?

Headline CPI ex-Shelter inflation is back above +2% YoY.

It's accelerating to the upside, while headline, core, median, and trimmed-mean CPI inflation are all accelerating on a YoY basis as well.

Service inflation within the CPI is accelerating YoY.

Durable goods inflation within the CPI is accelerating YoY.

Nondurables inflation within the CPI is accelerating YoY.

Basically the only material variable that's still showing disinflation is Shelter, which is the largest & laggiest component within the CPI; however, Owners' Equivalent Rent is also arguably the WORST way to measure what's actually happening in the housing/rental market.

That's why it's so important to extract Shelter out of different CPI measurements, so that we can evaluate how all other components within the index are actually evolving.

I'm not saying to outright dismiss Shelter...

I'm just saying that we need to dive deeper to fully understand and contextualize inflation dynamics.

Remember fam, embrace nuance.

Yes, the labor market is softening again...

But Powell has been very clear on this:

Inflation is further away from their target than the labor market is further away from their target, so they will continue to adjust monetary policy with a focus on inflation.

Do they see red flags in the labor market? Yes.

But they see way more red flags for inflation.

So their focus will (continue to) remain on inflation.

It's that simple, folks.

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