Reports of Inflation’s Death Greatly Exaggerated


“Ding dong, the worst inflation in four decades is dead” seems to be the happy, confident cry from investors for months now, with markets even assuming significant cuts in the federal funds rate by the Federal Reserve for most of this year, expected to begin in May and totaling close to 150 basis points.
Data released at the close of January show that the Personal Consumption Expenditures (PCE) price index, so-called “core inflation” (which excludes food and energy prices), fell somewhat more than expected, coming in at 0.2 percent November to December and totaling 2.6 percent over 12 months. In December, Fed Chairman Jerome Powell sounded like pronouncing that the D-Day in the war on high prices wasn’t far around the corner, cheering that “inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news.” Inflation would seem to have peaked in June 2022 when it was 7.1 percent, and the clear indications from the central bank were that multiple easings were set for 2024….


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