Inflation: We're Not in Zoltan Territory Anymore.
Wage-Price Spiral Risk is Real
The Fed is a kite blowing in a hurricane. They can only tug monetary strings a little to slow things. If they yank too hard, the whole thing dive-bombs. They must go with the fiscal flow now
Topics:
New Inflation Tools Needed
Zoltan Can’t Help Us Now
Studying Consumer Behavior
RECENCY BIAS
LOSS AVERSION
Powell Fears Wage-Price Spirals
Bonus: Stifel Gets Bearish Stocks
New Inflation Tools Needed
Two things to keep watch over now that inflation has subsided somewhat and unemployment may be rising.
Goods inflation as a function of Energy prices is the first. Why? Because the Fed raising rates has little control over this. Last stated in Inflation is not Dead At All
The Fed admits they have no control over the supply side of goods. Their success thus far in getting goods inflation to drop has not been their own doing. The fed got lucky.
As energy prices go up, goods prices will. Necessities will rise taking a bigger cut of paychecks. This is in addition to the limited success thus far the Fed has had in getting services inflation under control
Anyway, Goods inflation has been slightly (it is not “well under way” anymore as the pic says) tamed. And now it’s prepared to re-rally soon with oil doing its thing.
The second thing to watch is Corporate profits, which are tied to goods inflation.