Inflation Isn’t Going to Get Better

The same individuals who assured you a trillion-dollar cash injection into the system would not generate inflation and then predicted inflation would be temporary have issued another audacious forecast. 

The worst inflation in almost 40 years has reached its peak.

Underwhelming Reactions

The most apparent reason is the Federal Reserve reacted to an 8.5 percent year-over-year rise in consumer prices with a meager 25 basis point hike in interest rates.

Inflation is often a monetary phenomenon; the Fed’s bogus rate rise maintained negative actual interest rates.

This indicates the money supply, which is the cause of the crisis, continues to be dangerously unconstrained.

Then, there’s Wednesday’s terrible Bureau of Labor Statistics producer price index announcement.

The PPI not only outperformed expert forecasts of 10.6 percent, but it also reached a record high of 11.2 percent, the highest level in recorded history.

Particularly in a labor market as artificially constrained as ours, producer costs can be a leading indicator for consumer prices, the government’s most severe inflation indicator.

While it is feasible that simple supply chain improvements can alleviate the issue, the devil, as always, is in the details.

March’s PPI statistics demonstrated that quickly growing inflation is increasingly driven by the price of operations, rather than commodities.

Whereas the former cost remained stable at 2.3 percent from February to March, the rate of service price rises increased from 0.3 percent to 0.9 percent, according to the latest PPI statement. 

Service pricing is significantly more sticky than goods prices.

Even if the more unstable categories singled out by the White House experienced price reductions as a result of supply-side stability, rising salaries would continue to fuel a potentially disastrous inflationary cycle.

Blame It All on Russia

So how about the Biden administration’s chosen scapegoat? It is true that Russia’s incursion into Ukraine disrupted international markets.

However, the regional significance of Russia’s gas and Ukraine’s crops would result in excessive inflation in Europe if the conflict were indeed the primary driver of inflation stateside.

Rather than that, inflation in the US remains far higher than in Europe, especially in countries where the European Central Bank has imposed negative rates.

We can always see the White House’s identity through what the chief of staff retweets.

Biden’s staff highlighted the fact that the Fed’s preferred inflation indicator, the core CPI, actually exceeded analyst estimates.

While officials may be unconcerned about the energy and food categories owing to their unpredictability, voters undoubtedly are.

The most concerning sign of inflation has nothing to do with any BLS statistics. Rather than that, it is a matter of our leading financiers’ shattered credibility.

Consumers predict inflation to reach 6.6 percent this year, the highest level on record, and might further cement the self-perpetuating problem in the economy.

There is reason for optimism, but the rest of the expert class is chiming in with a bit too much happiness. Consumers and investors would be advised to modify their own expectations appropriately.