FDI Update

​A couple weeks ago in Inflation Is Slowing, I noted the first tentative signs of disinflation since the deflationary crash associated with the coronavirus outbreak. The latest FDI confirms the trend change.

Again, consumer prices are badly lagging inflation indicators, so this does not imply imminent relief on that front. But so long as the FDI doesn’t revert into downtrend, the pressure is off and over time relief will filter into consumer price inflation.


5 thoughts on “FDI Update

  1. cb says:

    Bold call. The guys at Hedgeye, who have a whole team working on these things, and who are often contrarian to mainstream wall street propaganda put out by CNN and Cramer types, agree with you.

    1. Bill Terrell says:

      Worth noting that it’s contingent on central banks following through on spoken intent. The about face from the Fed is about as close as it gets to “oops, we goofed”. But if Powell & Company lose their nerve and fail to raise rates as the bond market has already done, the FDI could resume its downward trend, in which case any hope for relief on consumer prices would perish along with it.

      It’s a bit ironic … so long as Powell et al insisted surging inflation was transient, there was no hope of it being so. Now that they’ve recanted, the prospects of transience are looking better. Clearly a case of the first step in solving a problem being admitting that there is one.

      Where they erred was in assuming inflation would abate while the policies causing it remained in place. It was only ever going to be as transient as the policies causing it.

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