Inflation Peaks? Perhaps…But for All the Wrong Reasons

 Inflation has peaked, but only because of a brutal unfolding recession. So, what now lies ahead for inflation? It is possible that inflation has peaked. But...for all the wrong reasons. First, even if the torrid pace of price appreciation slows a bit from the scorching trend of this past summer, a lower rate of inflationary ascent does not in any way mean that actual lower prices beckon.

What evidence points to a possible slowing of the inflationary madness?

• Energy prices have fallen significantly from the super-spike highs of the summer
• January futures contracts on the benchmark West Texas Intermediate Crude Oil fell from $108/barrel in June
• This discount has largely coincided with a serious economic slowing in China
• Other energy prices tell a similar story
• Gasoline sells for a national average of $3.54/gallon now
• Agricultural prices are now well off the summer highs -- but still materially more expensive than just two years ago

The recent concession in input prices flows largely from interest rate increases by the Federal Reserve Bank

• After years of super lax, accommodative policy, the Fed finally grasps the gravity of the inflation crisis they themselves helped to create
• This combination of an aggressively tightening Fed with an economy that tips over into recession produces a rare interest rate scenario known as an inverted yield curve- a near perfect record of predicting or coinciding with recessions

The outlook for the previously strong job market deteriorates intensely

• Over 120,000 highly paid Tech workers have been laid off so far in 2022
• This trend of job cuts appears to be in the early stages
• Half of all companies expect headcount reductions in the coming months

Biden's inflationary policies provided the tipping point to burst the bubble of artificially low interest rates

• Deficits suddenly matter again, with gusto
• The Bond markets globally deliver a profound vote of no confidence for the US economy as presently managed, and significant job losses loom

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