Whipping Inflation
Mike Zaccardi, CFA, CMT | May 09, 2022 03:26AM ET
This article was originally published at Bank of America , say the highest pace of consumer price increases may now be in the rearview mirror.
Inflation is typically measured as a percent change from a year ago. From here, prices for goods and services may still go up, but at a slower pace. That’s the hope.
As financial writer Morgan Housel likes to quip, “Optimism sounds like a sales pitch, while pessimism sounds like someone trying to help you.” Suggesting we may see a slowdown in inflation usually triggers a flurry of unfriendly responses on Twitter.
Still, there are some signs that inflation has indeed peaked. One of the biggest drivers of the inflationary spike over the past year has been the meteoric rise in used car prices. A lack of semiconductor chips and labor woes led to a freefall in U.S. auto production and inventories .
As a result, there have been few new cars on dealership lots, leading many to buy used vehicles instead. But the contributors to headline inflation.
On the other hand, copper , is down from a year ago.
On the labor front, Friday’s jobs report revealed continued robust increases in average report for March.
The report found that the number of job openings hit a new high of 11.5 million. The ratio of openings per unemployed worker has also climbed. The strong labor market is good for workers but bad for inflation.
Federal Reserve Chair Jerome Powell and the rest of the Federal Open Market Committee are, of course, seeking to cool inflation. Last week’s half-percentage-point interest rate increase by the Fed was the biggest hike since 2000.
The May meeting also kicked off asset sales to shrink the Fed’s $9 trillion portfolio of bonds and mortgage-backed assets. It sounds strange, but the Fed might want to see stocks drop, mortgage rates rise and job gains slow. It’s all about whipping inflation.
So will inflation slow? We’ll get an update on the Consumer Price Index on Wednesday morning. The consensus forecast calls for an inflation cool down.
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