Helped by falling car prices, CPI disinflation continued in October. While positive signs were seen in some services prices, MoM core services price growth remained above its historical average.
As in what Fed tightening and lower price growth says about future economic activity?
Just as I believe that the Fed's significant tightening, which is leading to declines in the M2 money supply, will reduce inflation, I also believe that it significantly raises the risk of a recession.
While there may be some MoM volatility, and it may take a significant additional length of time for the CPI to return to 2% YoY growth, as long as M2 remains constrained, I'm not concerned about a sustained rebound in inflation.
as always super insightful!
Thanks, Marlon!
Thank you very much for this interesting article.
Are you worried about second-round effects?
Thanks for reading!
As in what Fed tightening and lower price growth says about future economic activity?
Just as I believe that the Fed's significant tightening, which is leading to declines in the M2 money supply, will reduce inflation, I also believe that it significantly raises the risk of a recession.
Thanks for your reply.
I was talking about a rebound in inflation due to persistently high wage growth.
While there may be some MoM volatility, and it may take a significant additional length of time for the CPI to return to 2% YoY growth, as long as M2 remains constrained, I'm not concerned about a sustained rebound in inflation.