Inflation is coming back, and this time, central banks might not be able to save us. Yesterday, both PPI and Core PPI were published in the US, and Both came stronger than expected, 0.3% above expectations on an annualized basis. In the chart below you can also see the monthly CPI is trending up. Government spending is flooding the market with borrowed money that is chasing the same goods, pushing prices up. The whole chain of production is telling us prices are going up: raw materials, Producers Price, and Consumer Price Indexes are pointing to a rebound in inflation. And all this is happening without oil ramping up. The impact from gasoline prices has been muted. And the impact of tariffs is still not included, as for the most part, they haven’t been implemented. Central banks are going to have a tough time cutting rates. And maybe even worse, they might decide, absent a spike in unemployment, that they need to pivot back into hawkishness. The next FOMC meeting is on March 19th, and by then we’ll have the February inflation report. The world needs to cut government spending.
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