At the end of the previous analysis Inflation: Hell or High Water, we pointed out our distrust in the FED-promoted argument of a short-term inflationary shock caused strictly by the supply side. With the passage of time, we can assess that the inflation rate in the short term got out of the control of the central bankers. In this analysis, we have evaluated the development of the indicators observed by us and followed up on previous findings by highlighting various alternatives in the methods of evaluating the current – or estimating the future rate of inflation.
Analysis highlights:
- The widening gap between the US PPI and US CPI indices suggests continued margin contraction confirmed by Q1 2022 corporate results. The latest reading of the smoothed median PCE inflation index was at 3.70%, significantly above the 2% inflation target.
- In Europe, the situation is significantly worse than it was at the time of publishing the first analysis Inflation: On the Rise from June 2021. The difference between the German CPI and PPI reached 26.1 percentage points! The main reason is the interconnectedness of European economies with Russia, especially through the lens of commodity trade.
- Why is passive portfolio management insufficient in crisis periods associated with inflation?
