‘There is a wave of disinflation in the making’

Tonight the Fed will decide on interest rates; another 75 or even 100 basis points are expected to be added. But Paul Ashworth, chief economist for North America at Capital Economics, thinks the US central bank’s aggressive interest rate policy will soon be over.

“We think inflation will fall soon and if that works out, policymakers will soon opt for smaller interest rate steps,” he wrote in a note.

“The continued decline in gasoline prices and cooling food prices will weigh on the CPI (Consumer Price Index) over the next two months.” He also sees signs of disinflation at the core CPI, so adjusted for energy and food prices.

disinflation

Disinflation means that we are still in a period of inflation, but it is decreasing. The term should absolutely not be confused with deflation, in which the price level falls (prolonged).

Supply shortages are now less acute, and the Product Shortage Indicator suggests that core commodity inflation could fall to 2% as early as the end of the year, from 7% in August.

‘Less risk of wage-price spiral’

Ashworth says a wave of disinflation is in the works. “There are more signs of disinflation in a broader sense, ranging from airline tickets to hotel stays. In addition, inflation expectations have fallen, significantly reducing the risk of a wage-price spiral. We will soon see clearer and more convincing signs of cooling inflation. “

See also: Will there be deflation again next year?


That is not correct because a large part of the wages is already in the so-called price spiral

The article is in Dutch

Tags: wave disinflation making

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