US Inflation: the key points that you need to know
In light of the United States’ (US’) August Consumer Price Index (CPI) report, I provide this latest report as an update to some of the key points that I previously articulated here, which I believe are critical to understanding the US’ future inflation outlook. Whilst the market was caught off guard by the August CPI report, I saw it as solidifying these key points, which I reiterate now, being:
A shrinking federal government deficit and continued tightening from the Federal Reserve (Fed) is contributing to an extraordinary deceleration in the year-on-year (YoY) growth rate of the M2 money supply, which has flatlined in 2022.
Flatlining M2, in the absence of another spike in energy prices, points to a significant likelihood that the YoY CPI growth rate peaked in June 2022.
Despite the likelihood of the CPI peaking in June, lower YoY comparables will likely prevent a major deceleration in the YoY growth rate of the CPI throughout the rest of 2022.
The nature of the COVID pandemic and the …