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Afraid of inflation? Look at this chart before you freak out.



Inflation is on the rise in America. But if price pressure persists Contrary to the US Federal Reserve’s expectations The information will be a different image. One economist argued on Friday.

In a note to clients, UniCredit Bank’s chief international economist Daniel Vernazza highlighted the complex but interesting chart below:

UniCredit Research

The chart shows price changes (vertical axis) versus spending changes (horizontal axis) relative to pre-pandemic levels for February 2020 by industry. Use the personal consumption expenditure indicator instead of the consumer price index, as PCE is the Fed’s preferred measure of inflation and to better compare it to spending data.

It shows that most of the cargo moves forward and backward along the horizontal axis. This means that prices have shown little sensitivity to demand dynamics, Vernazza explained, and for the services sector particularly hard hit by the pandemic. This includes the cost of airfare and accommodation. The reopening of the economy only partially recovered the price. which has not yet returned to pre-epidemic levels

It’s a bit different when renting a car. Severe supply shortages have caused prices to skyrocket. Meanwhile spending in the sector remains below pre-epidemic levels due to limited supply, he said. The mix of shift from commuters to public transport and a global shortage of semiconductors for new cars has driven both demand and price.

It’s important to note, Vernazza said, because higher inflation is largely explained by the opening of new economies and supply shortages. Therefore, it is likely to be temporary proven due to the direct effects of the gradual pandemic Decline and supply adjusts to demand.

But what are the more sustainable inflation threats?

in that case Most of the items are in the upper right quadrant of the chart. which reflects what economists call “Demand-pull inflation,” Vernazza said. “This is clearly not the case.”

read: The CPI-vs.-PCE Debate and Other ‘Rabbit Vulnerabilities’ to Avoid When Considering Inflation

While inflation sped up in the financial markets as recently as last month. Investor concerns appear to have subsided. The Ministry of Finance rose on Thursday. Despite another hot-than-expected CPI reading by sending a return from the 10-year treasury bill TMUBMUSD10Y
1.452%
Below 1.45%

see: Treasury yields fall despite rising inflation – here are some reasons

Higher inflation is often seen as bad news for bonds. This affects the value of interest payments sent to the holders. Shares were higher Thursday with the S&P 500 SPX.
+0.19%
Recorded close on Thursday, while DJIA, the Dow Jones Industrial Average
+0.04%
Still not far from high-tech stocks that move high all the time. which is more sensitive to interest rates, pushing the Nasdaq Composite COMP
+0.35%
higher

Comments: Why is the rental car price? air ticket And the higher the cloak, the higher the price, the higher the inflation rate.

The Federal Reserve holds a policy meeting next week. While most Fed officials stick to their view that inflation pressures will prove “temporary,” many also said it was time to start considering when it would be appropriate to discuss withdrawals. Asset purchases at the center of extraordinary monetary policy efforts Support the economy and maintain the labor market

tell: Why bond markets may not experience a tantrum when the Fed signals it’s ready to move.

And some economists warn that signs of inflationary pressures in more cyclical economies are beginning to emerge.

Michael Pearce, senior US economist at Capital Economics, said: “Both owners’ rents and equal rents have recovered markedly in recent months. And food out-of-home prices are up 0.6%,” said Michael Pearce, senior US economist at Capital Economics. “It is no coincidence that rents and restaurant prices are rising rapidly when wage growth is also accelerating.”

Pearce said the steady increase in job openings showed a labor shortage. “It’s true and escalating.”

See also: ‘Take this job and go’: American workers quit at record level

“Recently strong inflation This and signs of a labor shortage could prompt a number of regional Fed presidents to offer forecasts for a rate hike. and strengthening calls for lower asset purchases earlier than at next week’s FOMC meeting,” he said. ‘Most are temporary’ and instead highlight a shortage of yawning jobs from pre-epidemic levels.”


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