Commentary
The most important economic question to date is still the old one: whether inflation has peaked or still has some months to go. The U.S. official tone on inflation has always been on the supply side such as the logistic blockage due to Covid-19 lockdowns or the Ukraine-Russian war. The demand side of ridiculous monetary easing causing inflation has never been addressed, albeit the real boosting effect has been emphasised repeatedly. Tracing the source of inflation is crucial because the supply side factors are fading out, but this is not yet the case on the demand side.
For over two quarters, lockdown is no longer practiced except in dictatorship countries. The Russian invasion can no longer push commodity prices beyond their March peaks. Hence, supply side advocators are now asserting inflation has peaked and will come down very soon. However, the fading out of these two factors happened in the second half of 2021 (H2) and the second quarter of 2022 (Q2) respectively, while inflation has continued to rise in the period. More importantly, core inflation excluding food and energy show a similar uptrend, suggesting demand factors might be in play….