Inflation: Stickier Than You Think

expand iconexpand iconexpand icon16 SEP 2022
Slow growth and disinflation is nothing but stagflation.
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The COVID shock and the ensuing money printing resulted in a massive inflation tsunami. This was accompanied by no real increase in productivity increases as real rates stayed negative and people, unbeknownst to them, actually became poorer than the pre-COVID days.

The stay at home era unleashed astronomical goods demand in conjunction with a commensurate or even worse service demand destruction. Now that science has won and COVID has almost been defeated, this trend has reversed sharply. Core goods inflation has therefore predictably slowed, while services inflation which is highly correlated to labor market pressures has not.

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