The Federal Reserve is facing renewed inflationary pressures as key metrics show simultaneous increases for the first time since February 2022. Here’s a detailed breakdown of the current inflationary landscape, its implications, and why it’s raising alarm bells:
🔶 Key Inflation Metrics Are Back on the Rise
Core CPI, PCE, and PPI inflation are all increasing at the same time, signaling a synchronized inflationary surge.
This marks a significant shift, confirming inflation is no longer easing.
🔶 Core PCE Inflation: A Closer Look
1-month annualized Core PCE inflation: Nearing 4%, signaling rising consumer prices.
3-month annualized Core PCE inflation: Back above 2%, indicating inflation momentum.
🔶 Core CPI: A Historic Streak
October’s Core CPI inflation hit 3.3%, up from 3.2%.
This marks the 42nd consecutive month of Core CPI inflation above 3.0%—the longest streak since the early 1990s.
🔶 Compounding Inflation & Wage Growth
Wage growth is rebounding across various sectors, increasing labor costs for businesses.
These costs are passed on to consumers, further fueling inflation.
Annualized Inflation Metrics Paint a Worrying Picture
🔶 Core CPI Inflation Rates
1. 1-month annualized: 3.4%
2. 3-month annualized: 3.6%
3. 6-month annualized: 2.6%
4. 12-month annualized: 3.3%
Every duration has leveled off above 2%, a sign that inflationary pressures are persistent.
🔶 PCE Inflation Breakdown
1-month, 3-month, and 6-month annualized PCE rates all suggest a trend toward 3.0%.
Market and Policy Implications
🔶 Fed Chair Powell’s Latest Comments
Powell recently backtracked on Fed policy, indicating the Fed is not “in a hurry” to cut rates.
This shift reflects the Fed’s growing concerns about sustained inflation above target levels.
🔶 1970s-Style Inflation Rebound?
Historical comparisons to the 1970s are increasingly relevant.
Inflation peaked near 12% in 1975, dropped to 4% in 1976, and then surged again to 15% by 1980.
Could we be headed for a similar pattern of rebound inflation?
🔶 Global Inflation Trends
Europe has also seen a modest uptick in inflation, mirroring the US trend.
A coordinated rise in global inflation could complicate monetary policy further.
The End of the "Fed Pivot"?
The Federal Reserve’s “pivot” to rate cuts is increasingly uncertain. While financial markets initially eased as though rate hikes never happened, rising inflation metrics suggest otherwise. The Fed must navigate carefully to avoid sparking another wave of runaway inflation.
The question remains:
Is the era of easy monetary policy truly over? Or are we heading toward a new inflationary cycle reminiscent of the 1970s?
Stay vigilant as these trends unfold—both the US and global economies may face turbulent times ahead.