Federal Reserve Chairman Jerome Powell continues to insist the surge of rising prices is “transitory. But if this is true, why are inflation projections for 2022 rapidly rising? It seems the markets aren’t buying the transitory theme. As prices continue to skyrocket, Americans paying more and getting less. Nevertheless, Powell stuck to his guns during his most recent trip to Capitol Hill. Transitory is his story, and he’s sticking to it! Powell conceded inflation “has increased notably and will likely remain elevated in coming months before moderating.” But he continued to insist we’re really only seeing significant price pressures from a few sectors such as the auto industry and they will abate. Meanwhile, inflation forecasts for next year keep creeping higher. As Deutsche Bank credit strategist Jim Reid asked, “At what point will the surge in 2022 inflation render the transitory debate moot?” If inflation is really transitory, we should see CPI come in under the Fed’s 2% target in 2022 compared to 2021’s big numbers that will serve as the base of comparison. But consensus 2022 CPI has risen to 2.5%. Although that would be well below the projected 3.5% CPI for this year, it would still rank as the highest full-year inflation of any year in the past decade. As ZeroHedge put it: Wall Street can’t have it both ways: it can’t be saying that soaring inflation is transitory on one hand while on the other predicting the highest 2022 CPI since the global financial crisis.” And about that Wall Street’s projection for a 3.5% CPI increase for this year — doesn’t that seems awful low given that we’ve already seen a 3.6% increase in CPI over the last six months? If the last half of the year simply duplicates the first, we’re looking at an annual pace of 7.2%.
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