Latest Inflation Numbers and Discussion

[audreyh1]

Yes, and at the same time that the stock portion of the Port. is tanking. Isn't that what we used to call Stagflation? Not fun, especially to anyone on the edge. I give thanks often that I've been blessed with more than I need, heh, heh, at least so far

Not quite.

Stagflation = persistent high inflation combined with high unemployment and stagnant demand in a country's economy

 

[MichaelB]

Yes, and at the same time that the stock portion of the Port. is tanking. Isn't that what we used to call Stagflation? Not fun, especially to anyone on the edge. I give thanks often that I've been blessed with more than I need, heh, heh, at least so far

Stagflation is when we have inflation but rising unemployment and no real change in aggregate demand. It’s about the economy, people and jobs.

We had many years of equity price growth, last year it declined, and this year is volatile so far. We’re so used to equity prices rising all the time we forget declines and volatility are normal.

 

[Koolau]

Not quite.

Stagflation is when we have inflation but rising unemployment and no real change in aggregate demand. It’s about the economy, people and jobs.

We had many years of equity price growth, last year it declined, and this year is volatile so far. We’re so used to equity prices rising all the time we forget declines and volatility are normal.

I stand (well, full disclosure, I sit) corrected. Thanks.

 

[Koolau]

At least we know the DOW and S&P won't go to zero, but some of your stocks can....

I saw one of those gold ads recently, where the spokesperson mentioned that gold never goes to zero either. Maybe I should buy some of that. No, wait. I did that back when it was a bit over $250 instead of today's $1900+. Yeah, I know, there are investments that have done better. Having said that, there are few investments with as long a track record of never going to zero (like from prehistoric times but YMMV.)

Returning you now...

 

[cyber888]

Europe's inflation is different as it is due to Russia-Ukraine, and Europe's inflation is at 8.5% today.
PPI yesterday was -0.01% translating to only 4.46% inflation for the US. The Fed will follow US data, not Europe.

European Central Bank increases rates by 0.50%.

They have their eyes on the goal.

I wonder what The Fed will do?

Yahoo Finance chatter is about Credit Suisse problems today. Worried to death about CS.

Good grief!! CS stock has been falling in a straight line for the last 2 years, beginning a year before the Fed tightening.

The US banks troubles were caused by poor decisions, incompetence, and maybe outright chicanery.

I am hoping for a 0.25% Fed hike. Stay the course.

 

[audreyh1]

Fed indicates that “financial conditions seem to have tightened” which potentially could have a strong macroeconomic impact and they are monitoring the situation. Fed raised interest rates 0.25%.

 

[Markola]

They are both tightening (rates) and loosening (backstopping banks with liquidity) at the same time.

 

[Montecfo]

They are both tightening (rates) and loosening (backstopping banks with liquidity) at the same time.

There is a second tightening: credit. These regional banks at risk of bank runs will not be going out of their way to extend credit on new loans.

And same with the SVB fallout. The other banks with large venture presence (PacWest, Western Alliance, Comerica) will probably not be rushing to extend new credit in those markets.

Interesting too that Treasury rates fell yesterday at all durations, other than the one month.

 

[Montecfo]

Dots suggest the following:
12/31/23 5.125 (+25BP hike from here)
12/31/24 4.125
12/31/25 3.00
longer run 2.50

So I guess this is consistent with JP saying a cut this year is not the baseline. But also consistent with only one more hike this year, presumably next meeting.

And of course subject to change.

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

 

[Koolau]

I have heard (on other forums - fora?) that stabilizing the dollar is the best way to fight inflation and head off recessions. Does anyone have expertise on this concept? How is that done? Or is it just another way of suggesting "it's complicated?"

 

[audreyh1]

I don’t know that stabilizing the dollar has anything to do with it.

If inflation is up in the US, and/or it looks like the Fed is going to raise rates more, dollar tends to strengthen. If it looks like inflation is running hotter in Europe and/or it looks like the ECB is going to raise rates, the Euro strengthens. If either is perceived to have possible recession their currency weakens. Recent behavior anyway US Dollar versus Euro. For the dollar to stabilize, both economies would have to have similar perceived outlook. I don’t see what benefit that would have for fighting US inflation.

 

[Koolau]

I don’t know that stabilizing the dollar has anything to do with it.

If inflation is up in the US, and/or it looks like the Fed is going to raise rates more, dollar tends to strengthen. If it looks like inflation is running hotter in Europe and/or it looks like the ECB is going to raise rates, the Euro strengthens. If either is perceived to have possible recession their currency weakens. Recent behavior anyway US Dollar versus Euro. For the dollar to stabilize, both economies would have to have similar perceived outlook. I don’t see what benefit that would have for fighting US inflation.

Once again, telling more than I know about it: A "strong" dollar must surely be "good" for USA inflation as it effectively lowers prices of all imported goods. Since the USA buys a LOT of imported goods, you do the math. My take: Take care of the dollar and inflation will be lower. Flood the world with dollars and it's inevitable that inflation will rear its ugly rear. But I know very little other than Econ 101 - supply and demand so YMMV.

 

[Montecfo]

Once again, telling more than I know about it: A "strong" dollar must surely be "good" for USA inflation as it effectively lowers prices of all imported goods. Since the USA buys a LOT of imported goods, you do the math. My take: Take care of the dollar and inflation will be lower. Flood the world with dollars and it's inevitable that inflation will rear its ugly rear. But I know very little other than Econ 101 - supply and demand so YMMV.

But makes exports more expensive, hurting US multinationals and trade balance.

 

[Koolau]

But makes exports more expensive, hurting US multinationals and trade balance.

Which has the most effect on inflation, though? (Real question as I don't know the answer.) My guess would be consumer prices would have more effect on inflation but YMMV.

 

[Montecfo]

Core PCE, the Fed's favored inflation gauge, rose 0.3% which was less than the 0.4 % expected, and less than January, which was revised downward to 0.5%.

The annual figure at 4.6% was also lower than expected.

This is a sign that inflation is continuing to moderate.

"Key Fed inflation gauge rose 0.3% in February, less than expected"

https://www.cnbc.com/2023/03/31/fed-inflation-gauge-february-2023-.html?__source=androidappshare

 

[Montecfo]

the "Supply" side of inflation

Was thinking, the Fed has been battling inflation with the tools it has: higher Fed fund rates and QT. This is addressing the demand side of inflation.

What about supply? We are short labor, but have lots of people on sidelines. Supply chain has improved, but could it get better?

It would be interesting to see a concerted effort to improve this. Here are some ideas:

Make all or most state licensing reciprocal.

Our governor here in Va recently did this. Why have teachers, tradesmen, hairdressers etc in any of 85 occupations licensed in other states sitting on the sidelines due to red tape when we have so many unfilled jobs?

Reduce legal working age or restrictions on hours worked in some cases.

Provide incentives for people to return to the workforce, such as a tax credit.

What can be done to streamline trucking, and add more drivers? Maybe find a way to adjust hours worked on a temporary basis.

Create state apprenticeship programs for trades in demand with unfilled jobs.

Streamline federal regulations to improve supplies of goods, reduce pricing.

Seems like there is a lot that could be done.

 

[Koolau]

Was thinking, the Fed has been battling inflation with the tools it has: higher Fed fund rates and QT. This is addressing the demand side of inflation.

What about supply? We are short labor, but have lots of people on sidelines. Supply chain has improved, but could it get better?

It would be interesting to see a concerted effort to improve this. Here are some ideas:

Make all or most state licensing reciprocal.

Our governor here in Va recently did this. Why have teachers, tradesmen, hairdressers etc in any of 85 occupations licensed in other states sitting on the sidelines due to red tape when we have so many unfilled jobs?

Reduce legal working age or restrictions on hours worked in some cases.

Provide incentives for people to return to the workforce, such as a tax credit.

What can be done to streamline trucking, and add more drivers? Maybe find a way to adjust hours worked on a temporary basis.

Create state apprenticeship programs for trades in demand with unfilled jobs.

Streamline federal regulations to improve supplies of goods, reduce pricing.

Seems like there is a lot that could be done.

All sound very good. I fear that there are vested interests that would put the kibosh on such efforts. I've seen it when the slightest easing of w*rk restrictions have even been suggested. YMMV

 

[Gumby]

The current extensive licensing regime, without reciprocal privileges, is mostly set up to protect current practitioners economically by limiting competition, not necessarily to serve or protect the public. And for that reason, the people currently practicing in those areas will fight tooth and nail against any changes.

 

[Koolau]

The current extensive licensing regime, without reciprocal privileges, is mostly set up to protect current practitioners economically by limiting competition, not necessarily to serve or protect the public. And for that reason, the people currently practicing in those areas will fight tooth and nail against any changes.

Spot on. The power wielded by some organizations is truly amazing.

 

[Montecfo]

The current extensive licensing regime, without reciprocal privileges, is mostly set up to protect current practitioners economically by limiting competition, not necessarily to serve or protect the public. And for that reason, the people currently practicing in those areas will fight tooth and nail against any changes.

Yes.. this is the challenge. But the People need this to improve the economy and reduce inflation. It is doable if states have vision and conviction.

 

[Gumby]

Yes.. this is the challenge. But the People need this to improve the economy and reduce inflation. It is doable if states have vision and conviction.

Good luck with your campaign. I can only quote my mother -- "If wishes were horses, beggars would ride."

 

[Montecfo]

It is not a campaign. But I am an optimistic person.

If the electorate demands this, it will happen. Already did in Va.

 

[GravitySucks]

I kinda enjoy the fact that I don’t worry about getting lice when I have my hair cut. The licenses were put into place for good reasons.

 

[Koolau]

It is not a campaign. But I am an optimistic person.

If the electorate demands this, it will happen. Already did in Va.

Keep in mind that a significant portion of the electorate WANTS the situation as it is. They have a vested interest and they vote to keep it that way. They have significant influence with those who can even bring it up to the electorate - so it rarely gets brought up.

 

[Gumby]

Keep in mind that a significant portion of the electorate WANTS the situation as it is. They have a vested interest and they vote to keep it that way. They have significant influence with those who can even bring it up to the electorate - so it rarely gets brought up.

Like many things, one man's waste, fraud and abuse is another man's paycheck. And the guys getting the paychecks (who are more concentrated and more motivated) are going to fight harder than the good governance guys will.