BarroMetrics Views: Inflation in the US
My view to date has been that we won’t see inflation numbers in the US rise in any any significant way until the FRED graph shows that US banks are again lending. Figure 1 shows the latest FRED - deposits are challenging the all time highs. Despite that, we are seeing inflation indicators start to rise:
- ECRI’s leading inflation gauge has been showing a steady increase over the past few months (the darker the red, the more recent the reading)
- The Bureau of Labour and Statistics’, CPI All Urban Consumers (CPI-U), shows a robust increase in the inflation numbers for the past 6 months.
So what have I missed?
What I failed to give enough credit to is the impact of the weakening US$ (as the world’s reserve currency): its decline is causing commodity prices to move smartly up. And this in turn is being reflected in the inflation numbers in the US.
Are the inflation numbers enough to cause concern in the FED? Probably not. Since Bernanke and Co tend to look over the shoulder and since their focus appears to be on deflation, we probably won’t see a hint of an interest rate rise until the ECRI gauge is closer to 1:00 PM.
From now on, I’ll be focusing on both the FRED and the ECRI gauge.
FIGURE 1 FRED
FIGURE 2 ECRI Inflation Gauge
FIGURE 3 BLS CPI-U(chart through the courtesy of John Mauldin)
FIGURE 4 Monthly CRB (chart through the courtesy of Futures Trading Charts)
Refer this blog post to a friend or colleague…
