Reader Bruce Hall writes:
Category Archives: inflation
July Inflation Undershoots Expectations
From today’s release:
One Year Ahead Inflation Expectations for July (and Forward 2-3 Year) Drop
The NY Fed measure of inflation expectations dropped dramatically from 6.8% in June to 6.2% in July. This is a much larger drop than the Michigan series (0.1ppt).
Inflation Expectations vs. Fed Inflation Target: Now Not That Far Off (If It Ever Was)
The Fed’s inflation target is 2% on PCE inflation. CPI inflation has averaged 0.5 ppts above PCE inflation since 1967. Putting these two points together, we see that expected inflation over the next five years is pretty close to target (h/t Mark Zandi).
Inflation Breakeven and Term Spreads Adjusted for Premia
Expected inflation inferred from the Treasury-TIPS spread is tainted by risk and liquidity premia. The difference between expected future short rates and current short rates is also obscured by risk premia. Here are adjusted spreads:
Will Commodity Prices Continue to Sustain Inflation?
Commodity price indexes through June have turned down, excepting energy. Front month futures prices suggests a further abatement of upward commodity price pressure, including in energy.
If We End Up Talking about the Global Recession of 2023, What/Who Will We Blame?
As forecasts are marked down (IMF releases new forecasts on Tuesday), here in two pictures is my answer:
Inflation, Gasoline, Recession
I was on WPR’s Central Time today, discussing among other things: “Gas and oil prices are starting to come back down. We explore what that means for inflation and fears of a recession.”
One Year CPI Inflation Expectations as of Mid-July
NY Fed consumer expectations up in June, Michigan down in July. WSJ July survey mean says y/y inflation will be 3.9% in June 2023.
Inflation in June
A little bit of old news, but it seems useful to see what various indicators show, month-on-month annualized. Chained, trimmed and sticky price inflation are all lower than headline: