Don’t get too excited over one good inflation report

Bloomberg/John Authers/12-14-2022

“Once sticky prices are rising, however, it’s a sign that inflation psychology is becoming embedded. And sticky price inflation is still very high. On a year-over-year basis it’s at a four-decade high, while inflation over the last three months is running a bit less than at the peak earlier this year — but still at a pace unseen in decades. Once sticky prices come unstuck, will they keep trundling upwards? It’s a crucial question, to which we don’t yet have the answer:”

USAGOLD note: During the 1970s big swings up and down in the inflation rate were commonplace (see chart below), but there was no mistaking the overall trend. Stagflation, the real culprit back then and the one feared most now, began slowly, gathered pace, became very sticky, and stayed so through the early 1980s.

US inflation rate 1970-1979
(%, monthly, annualized)

Chart courtesy of TradingEconomics.com