Chart of the week
After several months of acceleration that took inflation to over 8% overall and over 6% excluding food and energy, the April figures showed a slowdown, with core inflation falling from 6.5% to 6.2%. However, core inflation was slightly higher than expected. Indeed, closer study of these statistics shows a continuing trend of strong inflationary pressure.
The Atlanta Federal Reserve breaks down the consumer price index into items that move frequently and those that move little and have much more persistent price movements. The former account for about one-third of the group of reference and include mainly food, energy, vehicles and clothing. Persistent inflation is seen mainly in services. According to the economists making this distinction, this persistent inflation offers a better view of inflation expectations.
The graph above shows the breakdown of inflation excluding food and energy according to this method. We can see that the initial phase of inflation acceleration focused on the flexible part, but last month the more persistent elements continued to accelerate.
Between March and July 2021, prices for the most flexible components jumped more than 12%. They are unlikely to repeat this exceptional change, so “flexible” inflation is likely to slow significantly, weighing on overall inflation. On the other hand, the acceleration in persistent inflation suggests that, despite its slowdown, the consumer price index should remain above the central bank’s target, making it necessary for the Fed to continue tightening.
The opinion expressed above is dated Mai 13, 2022 and is subject to change
See also: https://latribune.lazardfreresgestion.fr/en/the-skyrocketing-euribor/
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