Another disappointing month for inflation. But don't lose your courage just yet. Market expectations have shed almost 5 rate cuts so far this year, and yet everything is just fine (the Fed isn't as tight as it says). Does this mean there will be hikes? No. Core CPI ex-OER at 2.51% YOY is just one basis point above the Fed's target for it.
What you’re not hearing about that horrible March CPI report
Wednesday, April 10, 2024
A replay of the 1970's resurgence of inflation is simply not possible.
Update to Strategic View
CPI was hot again in March. Energy was the worst culprit. The good news is that food inflation has cooled significantly. Powell has spoken of the risk of declaring victory too soon, so this brings to mind the disappointment of the mid-1970s when it seemed inflation was conquered, but came surging back to new highs by 1980. That was because money supply growth was then the fastest in the history of the data -- a resurgence, with a lag, was inevitable. M2 is now contracting, the exact opposite of the situation half a century ago. Deflation is still a possibility, but a resurgence of inflation cannot happen when money is shrinking.