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Americans’ Inflation Expectations Just Collapsed
When it comes to inflation, expectations matter. A lot.
We've all been led to believe that price growth is "always and everywhere" a monetary phenomenon, but I've got news for you: If energy bills quintuple because an aging autocrat decides to redraw a border or if consumers become convinced that economy-wide prices are set to spiral out of control, your textbooks and formulas won't much matter. If there were just a handful of genuine US dollars in existence but nobody thought they were worth a
2013, what a time to be alive. I was 28, in Chicago, and very very happy.
The FOMC is fighting yesterday’s war. Home prices- lower. Baltic Dry Index (shipping)- lower. Commodity prices (including natural gas in Europe) – lower. Financial asset prices – lower. Dollar stronger (except for the last couple of days). Supply chain- looser. Goods inventories in US – up. The only figure I find that would indicate price pressures is employment- and that tends to be the last shoe to drop. But drop it will. The Fed is about to lose more credibility with jumbo sized hikes going into a recession. They would be wise to slow down or even stop soon. Adding insult to injury is QT- that is playing with fire- the last time the Fed dabbled in that they almost shut down the financial markets. You don’t gain credibility by compounding your error. Inflation this year will be a high number, but not because of July – December 2022. That will be a large dose of disinflation, we best hope not outright deflation.
With all due respect, I think a little deflation is just what the economy needs.
disinflation sure. deflation no.
I wrote this comment on here on August 6th, 2020.
In less than a month from now we could see either a strike or a lockout of the entire U.S. rail industry, nationwide. I’d be keeping this on my radar.
U.S. Railroad Workers Inch Closer to a Possible National Strike
After Biden appointed an emergency board to help resolve the labor dispute, rail workers warn: “We have the ability to stop the trains from moving.”
https://inthesetimes.com/article/railroad-workers-strike-biden-board-bnsf-union-pacific-amtrak
Railroad Profit-Making Strategy Comes at a Cost
A looming strike and struggles with a proposed merger could reflect a reckoning for the rail industry’s determined efforts to squeeze capacity.
https://prospect.org/economy/railroad-profit-making-strategy-comes-at-a-cost/
And now, here we are today. Prices are already increasing on Lumber…
Coal, Lumber and Food Under Threat by Potential US Rail Strike
https://www.bloomberg.com/news/articles/2022-09-12/white-house-urges-rail-labor-dispute-solution-to-avoid-shutdown#xj4y7vzkg
Very interesting post. I have never looked at the internals of the survey. Question for anyone who has – does the “expectations for home price gains” have any predictive value for the OER component of CPI?