Inflation hopium!

Inflation indicators

There's so much news around about inflation at the moment...and there's definitely more inflation in the post to be reported for Australia over the next few months ahead.

Some brighter news is that looking further ahead, inflation in the U.S. does look like it's going to come back down.

In fact, it may well already be happening.

A few graphs...

Firstly, used car prices are down -9 per cent on a rolling 6-monthly basis. 

Charlie Bilello points out that this was one of the first indicators to spike on the way up, and now it's leading inflation back down:

Crude oil is very close now to being lower over the year, after a tremendous struggle to release supply:

There's been a very big drop in gasoline futures.

Ocean freight rates experienced their biggest weekly drop to date, plunging another -14 per cent, and all but completing what has been one heck of a round trip journey. 

Of course the U.S. still has some inflation challenges ahead, not least in the form of rents which are still rising fast. 

But 'nowcasting' models are pointing to less upwards pressure on prices, and indeed market-based measures of inflation expectations 1-year ahead are down at just 1.7 per cent, which believe it or not would actually be an undershoot of the Fed's inflation target should this come to pass. 

Canada's unemployment rate leapt to 5.4 per cent it was reported overnight, so the tighter policy is beginning to flow through (and New Zealand will be next cab off the rank). 

Australian policy outlook

In Australia, Governor Lowe made the point this week that inflation expectations show a high degree of confidence that inflation will return to target.

And why wouldn't they, after so many years of core inflation undershooting the 2 to 3 per cent range?

CBA's Gareth Aird represents the dovish end of the forecasting spectrum, anticipating interest rate cuts by the second half of 2023. 

Source: ForexLive

Well, that this week's inflation hopium shot for you...have a super weekend!