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

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6 thoughts on “Americans’ Inflation Expectations Just Collapsed

  1. 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.

  2. 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.”

    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.

    And now, here we are today. Prices are already increasing on Lumber…

    Coal, Lumber and Food Under Threat by Potential US Rail Strike

  3. 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?

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