Commentary
The latest released U.S. inflation rate showed that overall inflation eased a tiny bit from 8.3 percent to 8.2 percent, while core inflation (excluding food and energy) edged up from 6.3 percent to 6.6 percent. The divergence between overall and core inflation began in May and has persisted until now, as both have been showing flat trends. When there is no unilateral movement of the inflation rate, core and non-core rates can diverge, as we’ve seen over the past months, until they both restart another unilateral movement.
The most worrying thing is that “another unilateral movement” may not happen anytime soon. Even if inflation has peaked, it may stay flat at the existing level for a long time. U.S. core inflation has been 5.9 percent to 6.6 percent since the beginning of 2022. There has been little change in the trend regardless of commodity prices surging and then slumping during the period. This flat trend has remained for three quarters, and can hardly be regarded as transitory. Moreover, any level over 6 percent is unacceptably high….