Now there is another voice in the market, that is, there will be no interest rate cuts and even interest rate hikes. Let me refute it, haha.
First of all, you have to understand that inflation is a self-healing thing (repeat three times here), of course, the premise is: money is not over-issued.
Since 22 years ago, although the Fed's QT is not as severe as it seems on the surface (BPFT, RRP, TGA), it is definitely not over-issued overall, so inflation will inevitably heal itself.
Why does inflation heal itself? This is caused by a simple supply and demand relationship. Increased demand => price increase => increased profits => increased supply => price drop
Very simple economics 101.
Commodity inflation has perfectly interpreted this process in the past two years and has begun to stop falling and rise.
The only two uncertainties now are:
1. Oil
2. Services
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Think about what the biggest variable is recently in oil? China's real estate and infrastructure are in decline. You can't sing short China and sing long oil prices at the same time, which is a mental breakdown.
Historically, oil prices are mostly driven by demand, and only in special periods are they driven by supply. Special periods include:
1. Oil embargo in the 1970s
2. US shale oil in 2014-2015.
Now these two factors do not exist, supply may be slightly tightened, but it cannot catch up with demand. Unless the Middle East war breaks out again, but it is obvious that the Democratic Party dare not continue to play with fire.
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Let's talk about services. For services, let's look at wages (Figure 1) - It can be seen that the service CPI was almost completely consistent with the hourly wage level before 2020, and it was decoupled after the epidemic.
In Figure 2, we divide services by wages. To put it bluntly, wages first increase (empty checks), but services fall because of the epidemic blockade. After unlocking (January 22), the service increase will catch up with the wage increase.
It has not caught up yet, but judging from this upward ratio, catching up with the wage increase will be a matter of September.
When inflation catches up with wages, what reason is there to continue inflation?
Service inflation will be eliminated in September
