Will Inflation Come Roaring Back?

In recent months Central Banks have been able to say inflation was falling back towards their targets. But, this had little to do with their rate hiking cycle, and more to the adjustment in supply-side prices, especially energy. The so-called base effects where big lifts in inflation months ago dropped out helped the narrative. But the inflation battle is far from over.

This is because ahead the base effects will reverse. And then we must consider the recent spike in energy prices, plus higher wages flowing through to the services sector of the economy. So overall, I think it is likely that inflationary pressures will reaccelerate in the months ahead. In the US as oil and gasoline continue their upward trend, CPI could potentially rise back above 5.1%-5.5% by year-end. Therefore, inflation levels could remain elevated for a more extended duration than is presently anticipated by financial markets.

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[PaddyAU]

One would think so:
Oil tipped to go $100 a barrel
Green energy means higher prices
NSW teachers just got 8% pay rise - set the scene for other sectors

[AnthonyLoflin-or]

It hasn't gone away and yes, it will accelerate again soon.

[SteveSmith-zzih]

i went to a local supermarket and a milk brand that starts with a A and ends in a 2 was $9 for 3litres. WTF is going on there, not so long back it was around $5. Terrible rip off. Yer i know don't buy it, well i didn't they can go jump into the duck pond.

[frasersamuel]

If you overlay Australia's current inflation rate with the 1970s the chart currently is tracking exactly what happened in the 70s. I forget which commentator highlighted this fact.

In other words inflation is highly likely to have a second awful spike as per the 70s.

Look at the charts you'll get a shock

[PaddyAU]

If RBA and gov think trimmed mean of 5.8% is under control I would hate to imagine how high it will get when they admit we have a problem

[TOOOO]

And the media saying it's under control now lol. The interest rates have done hardly anything! I see most of the product's l am purchasing creeping up again. When you have a strict budget, you notice the little 30 - 40 cent hikes on products. Some products have reduced but a lot are still slowly creeping up. Also just looking at the state and facial expression on your fellow shopper indicates things are not good at all! It's going to be a very different Christmas this year, I predict lots of Shoplifting and Unfortunately domestic violence will spike. So many people really don't know what's around the corner and have not prepared at all. So many people with addictions and financial issues its scary! If you don't face the music now you are going to get wiped out!

[jetplane]

Hello Martin 🙂

Most assuredly inflation will be roaring back

[tprnewman]

With a fiat monetary system inflation is a feature not a bug.

[chrisraymond]

The weight of historical evidence is that just when you think a trend will continue it reverses. All previous central bank rate rising cycles have come to an abrupt end well before they were forecast and rates have then made new lows. The damage to the global economy has already been done, normally with the indicators of new orders, industrial production and disposable income at current levels central bank would already have been easing. Inflation and unemployment are the most lagging of economic indicators.

[gordonflash]

Government borrowing started it off. Laws are needed to prevent governments borrowing, only this will stop governments kicking off inflation cycles.

[jimmyhvy]

it isn't Wealth Gain ! It's Inflation !
Bubbles are Inflation, IMHO .

[vincentcacciola]

Inflation is alive and well the idea it has gone down is hilarious

[richarddobosz]

Very good presentation plenty of information

[rebuildingdad]

What do you mean come back? It hasn't left. Prices increase daily in case you haven't noticed.

[mackakiwinz]

Wonderful broad concise overview thank you Martin. You look to have settled in really well with your move.

[fullspectrumdominanc]

Everyone I know has completely stopped buying anything unnecessary the only reason to put prices up is for corporations to keep making money when sales are low.

[dan]

Global crude oil production has declined since 2018, as has liquid fuel production but suplimented by alternate fuels. Major industrial metals are also in short supply. Phosphate partically but potasium and nitrogen fertilizer are in short supply. With all these commodities in most probable increasing short supply and rising costs inflation will only decline with a recession.

[Mortimus]

In the hands of our inept Government, we will see Recession as well.

[PaddyAU]

The vested interest story of “inflation is under control” is akin to Bush standing on the War Ship with the banner “Mission Accomplished”

[williamcrossan]

I wonder if the growing momentum of housing prices will start pushing inflation back up?