K-Shaped CPI Report for a K-Shaped Economy, Says JPM's David Kelly

Group 1 - The inflation data indicates a K-shaped economy, with rental inflation decreasing and used vehicle prices falling, suggesting a divergence in economic recovery [2][4] - Core goods prices, excluding food and energy, are only up 0.2% year-over-year, indicating that mainstream retailers are currently unable to pass on tariff increases [3][4] - The Federal Reserve may continue to cut interest rates, potentially bringing inflation below 3% by the end of next year, as inflation fears appear to be overblown [4][6] Group 2 - There is an expectation of a tax refund bonanza early next year, with average refunds projected to exceed $4,000, which may allow retailers to pass on tariff increases [6] - Despite potential short-term tariff inflation, the overall economic momentum is weak, suggesting that inflation will cool down again [7] - Concerns are raised about the need for the Federal Reserve to add more liquidity to the financial markets, given their current bubbly state [7]