Commentary There was much rejoicing last week as June’s headline CPI (Consumer Price Index) came in at 3 percent, the lowest level of overall price level growth since March 2021. Financial media declared that the United States has entered “disinflation mode” and that the season of post-pandemic inflation was nearing an end. The previously scorned word “transitory” was reintroduced to inflationary discourse.
While the reduction in headline CPI to 3 percent from last June’s 9.1 percent was certainly welcome, discussion about the “end of inflation” is at a minimum premature and quite possibly misses the point altogether.
It’s time for an inflation reality check. Core inflation (which excludes volatile energy and food prices) remains stubbornly high at nearly 5 percent, and overall price levels are up nearly 20 percent since June 2020. Until both core inflation comes down and wages catch up with what appears to be a permanently higher overall price level plateau, inflation will remain a non-transitory problem….