Daily update
Daily update
- US consumer price inflation is expected to slow (month-over-month). Uncertainty comes from volatile used car prices (which do not affect most US households) and the fictitious Owners’ Equivalent Rent (which affects no US households at all). Housing costs will be disinflationary this year, but the timing is difficult.
- The 2021 transitory inflation driven by demand is now deflation—television prices are more than 21% below their post-pandemic high. The second inflation wave—an energy supply shock—is now disinflationary. Profit margin-led inflation remains. As companies sneak profit alongside cost increases, profit margin-led inflation is likely to be stronger at the very start of the year when cost increases are most frequently passed on.
- New IMF growth forecasts reflect the impact of banking system volatility. US Treasury Secretary Yellen and Federal Reserve officials have downplayed fears of an accelerated tightening in lending. Such officials need to cheerlead the banking sector at times like these, so there may be a rustle of pom-poms in their assertions.
- Fed minutes are due—the Fed met at a time of greater uncertainty over the banking system, but the final draft of the minutes was written two weeks later when things had calmed. Bank of England Governor Bailey will speak on price and financial stability.
