Proof Inflation Isn’t Going Away Anytime Soon

Andy Snyder|February 23, 2023

Things aren’t bad enough in the economy… at least not yet.

It’s still too comfy out there for Jay Powell and his monetary maestros. Although they have the nation sleeping on a bed of nails, the pain isn’t severe enough.

For a country concerned about inflation, the latest news isn’t good.

It’s just like we’ve said many times before…

There’s still too much money out there.

The restaurant industry, for example, continues to wonder where everybody is coming from. Despite layoffs and plunging home and retirement account values… business remains good.

The latest report shows folks are once again spending more at restaurants each week than they are at the grocery store.

The Great Depression, this is not.

Used car prices have been one of the strongest barometers of the nation’s economic health in recent years. The Fed celebrated late last year when prices fell. But that trend has reversed. The latest reading shows prices have risen 4%… in just two weeks.

Heading into tax refund season, the spike is likely to grow even larger.

That’s not good news for Mr. Powell.

Rising gas prices are another sign of inflation’s stubbornness. In some parts of the country, prices have risen for 14 straight days. In California’s San Diego County, the price of a gallon of gas has risen by $0.23 over the past three weeks.

The average price is $0.108 higher than it was a week ago… $0.274 higher than it was a month ago… and $0.07 higher than it was a year ago.

It’s an especially troubling sign as we head into the nation’s peak driving season, when demand surges.

But here’s the most troubling part of all of this…

Two Options

Jay Powell still has the guts to stand on a podium and tell us that inflation will reach his 2% target in 2024. In fact, he says it sheepishly… as if he once believed it would happen this year.

He’s either ignorant or lying.

Right now, the inflation rate is 6.4%. What cost $100 last year costs $106.40 this year.

But here’s the thing: That’s on top of the 7.9% inflation rate we saw this time last year. So what cost $100 in 2021 cost $107.90 in 2022 and costs $114.81 now.

But Jay Powell says the pain is almost over. We’ll be down to 2% next year.

Ha.

It’s an unbelievable figure given that inflation has dropped little more than 150 basis points in a year when interest rates have surged. Are we to believe that, in Powell’s words, “a couple more” hikes will quickly bring things down?

No.

One of two things will happen from here. Either inflation will “surprise” the masses and prices will surge higher and faster than before… or the Fed will once again abandon its rhetoric and push rates higher than most folks expect.

Right now, the market is pricing in both scenarios.

It’s not good news.

Continue to invest as if inflation will remain higher.

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