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Kelly Evans: Where prices aren't going up

CNBC's Kelly Evans

I keep having sticker shock at the fast-food checkout. 

This morning I swung by Dunkin' on my way in for a much-needed second breakfast. Small coffee, croissant sandwich, and hash browns. The bill was over $7. Earlier this summer, I splurged for the medium-sized Blizzard at Dairy Queen (mint Oreo, obviously). It was more than $6! I was so startled I still remember it. And a few weeks ago, we stopped by Wendy's for a late-afternoon snack. Ten-pack of spicy nuggets, a lemonade, and a third minor item that escapes me now, and the bill was over $10.  

So I'm happy to pound the table on fast-food price inflation. But despite this morning's surprisingly strong CPI report, I can't jump on the broader "inflation-is-coming" bandwagon just yet.  

We saw a 0.4% jump in August consumer prices, the third month in a row the report was stronger than expected. Still, the index is only up 1.3% from last August. The core (excluding food and gas) is up 1.7% on the year. There were some notable standouts: used car prices posted their biggest jump in fifty years. Household furnishing prices rose by the most in almost thirty years.  

That's not the whole story, though. Especially on the services side, price gains were pretty muted. Air fares and car insurance pricing was softer. Housing and health care price hikes were muted, too. And yes, suburban home prices are going bananas. But rents in large markets like New York and San Francisco are falling sharply, keeping those overall housing "costs" at bay.  

Even in those areas where prices did spike, like home furnishings, inventory shortages are a major reason. As Jefferies points out, the retail industry's inventory-to-sales ratio has plunged to a record-low 1.15 (it floats between one and two, and hovered around 1.4 over the past decade). This rings true; I ordered some Pottery Barn curtains for our bedroom that won't be in stock until late November. It won't last forever, though. As Jefferies' Aneta Markowska put it, "the price firmness might continue for another month or two, but not beyond that."  

The larger debate is over whether we're at a major inflection point on the inflation front after thirty years of global deflationary forces. The camp that says "yes," which includes luminaries like Stan Druckenmiller, who warns inflation could hit 5-10% in coming years, points to the Fed's major money expansion. The camp that says "no," which includes the bond market right now, is more wary of the Covid "debt hangover" I wrote about earlier this year.  

Still, the higher CPI reads are awkwardly timed ahead of next week's Fed meeting, where the Fed is expected to "take the first step in shifting from stabilization to accommodative policies," according to Bank of America--in other words, getting more dovish. 

If the Fed is serious about letting inflation run "hot" until the unemployment rate fully recovers, this will be the first of many times in the years ahead that markets will want them to prove it.   

See you at 1 p.m!


Twitter: @KellyCNBC

Instagram: @realkellyevans