July 1, 2022
IT'S IMPOSSIBLE TO OVERSTATE DEFLATIONARY PRESSURE:
Three Things I Think I Think - Flation, Flation, Flation (Cullen Roche, 06/30/2022, Pragmatic Capitalism)
1) Inflation has peaked.Back in January I said inflation had peaked. This morning's Core PCE data seals the deal for me - it looks like inflation peaked in February. So, I missed it by a month. Still, this one looks very clear to me from here on out. The year over year comparisons become much flatter as the year goes on. By the end of the year a lot of the underlying inflation components are going to be negative. Given all the broad economic weakness and potential downside in housing, my baseline is that inflation is still going to be well above the Fed's 2% target by year-end, but I think the odds of a runaway 1970s style inflation are very, very low now. There is no chance of hyperinflation. I would actually argue that the risk of deflation is substantially higher at this point than the risk of hyperinflation.
The effects of the forced transition away from carbon and labor alone are epochal.
Posted by Orrin Judd at July 1, 2022 7:10 AM