There is more inflation complexity ahead

Project Syndicate/Mohaned A. El-Erian/2-9-2023

“Nearly two years into the current bout of inflation, the concept of “’transitory inflation’ is making a comeback as the COVID-related supply shocks dissipate. This comes at a time when it is critically important to keep an open mind about the trajectory of inflation, including by avoiding an over-simplified transitory narrative that risks obfuscating the real issues facing the US economy.”

USAGOLD note: All considered, it seems the Fed chairman is betting that the turnaround in inflation will ultimately bring rates in line with the CPI. What if it doesn’t happen? There is a growing body of evidence that supply-side-driven inflation is building once again in the global economy. Prices, in short, could take off again. ‘[W]hile US inflation has been slowing,” says El-Erian, ” it is dangerous to suggest that the problem is behind us.”