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Inflation Watch A mid-month focus on inflation via Traditional Indexes, Commodity Prices, and Labor Costs

Jul 14 2021

Inflation—Another Strong Beat

  • Jul 14, 2021

The CPI numbers exceeded the most aggressive market estimates. The bond market’s message is quite clear: the concerns of Fed tightening outweighs inflation. While it’s still debatable whether inflation is “transitory”, the reflation trade still gets the benefit of the doubt. 

 

Jun 10 2021

Inflation—Feeling Hot, Hot, Hot

  • Jun 10, 2021

CPI figures for the last two months have pummeled estimates and set multiyear records. Equity and fixed income markets seem to be comfortable in the Fed’s assessment that these high inflation prints are transitory.

May 13 2021

Inflation—Too Hot?

  • May 13, 2021

The CPI numbers blew past market expectations. Equity investors might feel it’s too hot, as higher inflation has historically been associated with lower equity valuations.

 

Apr 14 2021

Inflation—All About Expectations

  • Apr 14, 2021

The CPI numbers are a tad better than market expectations. Expectations for higher inflation are already quite high and that means simply meeting expectations might not be enough.

 

Mar 11 2021

Inflation Spotty, Not Yet A Problem

  • Mar 11, 2021

The Core CPI numbers were slightly below estimates easing inflation fears. Inflation in the Energy complex has driven headline inflation to a one year high. Readings over the next few months will be distorted as we reach the anniversary of last spring’s collapse.

 

Feb 11 2021

Moderate Inflation—Enjoy It While It Lasts

  • Feb 11, 2021

The Core CPI numbers are slightly below consensus. With equities at extreme valuations, having well-contained inflation is not a bad thing at all. Enjoy the “goldilocks” while it lasts.

 

Jan 14 2021

Blue Sweep + New Fed Regime = Higher Inflation Ahead

  • Jan 14, 2021

The CPI numbers are largely in line with expectations. A blue sweep and a new Fed regime is a powerful combination that should be taken seriously. We now believe the odds of higher inflation are materially better than just a month ago.

 

Dec 11 2020

Inflation Remains Moderate

  • Dec 11, 2020

The CPI numbers are slightly ahead of expectations. The reflation trade and the weaker dollar trade are very popular but they are no no-brainers. Our moderate inflation view is supported by the latest reading of our Inflation Scorecard.

Nov 13 2020

Inflation—Still Moderate

  • Nov 13, 2020

The CPI numbers are slightly below expectations. Positive vaccine news has kept the rotation trade alive. Our moderate inflation view is supported by the latest reading of Inflation Scorecard.

 

Oct 14 2020

Inflation—Calm Before The Blue Wave

  • Oct 14, 2020

The CPI numbers are in line with expectations. The inflation impact of a “blue wave” will be much more significant and the markets are already trying to price that in.

 

Sep 11 2020

Fed Looking To Make Up Lost Time

  • Sep 11, 2020

CPI figures beat expectations but inflation remains below desired levels.The Fed’s change to an average inflation target means a higher desired range. Government spending and depressed consumer confidence highlight our Inflation Scorecard.

 

Aug 13 2020

Reflation Strengthening

  • Aug 13, 2020

The CPI numbers beat expectations again. The reflation theme is supported by a weaker U.S. dollar and lower real yields. Our inflation scorecard is also consistent with a reflation story.

 

Jul 15 2020

Reflation Green Shoots Multiply

  • Jul 15, 2020

The non-seasonally adjusted headline CPI rose 0.6% (y/y) in June, a bit stronger than market estimates. The Core CPI maintained its 1.2% annual pace (Chart 1), which is also a tad stronger than the market expectations. There was very little market reaction  to these new numbers since investors have learned to look through these numbers after COVID-19 and the latest numbers are not enough to impact any policy directions in the near term.

 

Jun 10 2020

Some Green Shoots Of Reflation?

  • Jun 10, 2020

May’s month over month CPI results missed expectations but rebounded from April’s plunge. Deflation is still on the table but several indicators have bounced off their lows. Inflation results are less meaningful as large segments of the Index are inaccessible to consumers.

May 13 2020

COVID-19 Impact Showing Up In Inflation

  • May 13, 2020

The CPI numbers missed expectations. COVID-19 is the divide between inflation winners vs losers. Our inflation scorecard continues to point to lower inflation and it’s driven by a demand shock. Lower capacity utilization and money velocity also indicate a disinflationary trend ahead.

 

Apr 14 2020

Inflation Takes A Backseat

  • Apr 14, 2020

The CPI numbers missed expectations. The segments most affected by COVID-19 were the biggest detractors. The market isn’t too concerned about weak inflation at this point, because there are much bigger issues at present, such as liquidity and financial conditions.

Mar 12 2020

Saved By Zero (Fed Funds)?

  • Mar 12, 2020

February’s “Coronavirus Free” CPI data came in a tick hotter than expected. The massive downdraft in risk assets will be extraordinarily deflationary and we question whether the Fed can ride to the rescue once again.

 

Feb 14 2020

Inflation In-Line & Scorecard Neutral

  • Feb 14, 2020

Where inflation goes next will be primarily determined by the probability of a recession.

Jan 14 2020

Fed Keeping Both Feet On The Wheel

  • Jan 14, 2020

Headline and Core CPIs both post slower than expected gains in their month-over-month figures. The Fed’s laissez-faire attitude for 2020 seems appropriate for now. Interesting movements in commodity indexes may signal future upward price pressure.

 

Dec 13 2019

Inflation Porridge Is Just Right

  • Dec 13, 2019

Wednesday's report contained no datapoints that might sway Fed policy. After three cuts in 2019 and a restart of quantitative easing, a recession that felt almost imminent at the beginning of the year seems to have been avoided.