SchiffGold: Here’s why Inflation Is Going to Get Worse
After dropping for most of the past year, inflation numbers finally started to tick higher slightly in January. Given that nothing moves in a straight line, we could still be on track to see inflation drop.
However, other factors at play suggest that inflation will remain higher for longer. Indeed, it may even get worse in the coming months before it gets better.
In January, prices rose 0.5 percent month-over-month. Those who saw the Federal Reserve as being near the end of its rate hike cycle may need to rethink that view. That’s because inflation is still at 6.4 percent, or more than triple the central bank’s 2 percent target.
So what’s the plan from here? The Fed likely still needs to raise interest rates at least until rates are higher than inflation. Rates are at about 5 percent today, so further hikes are needed. And even then, it will take time to see if those hikes are working.
Meanwhile, the Fed has brought out the concept of supercore inflation. It’s a measure that excludes the cost of shelter.
That move came as mortgage rates more than doubled in the past year, and rents saw a big jump in the last three years. It’s easy to see why the Fed would want to downplay that.
And it’s another sign that inflation may continue higher for longer. That, in turn, could continue to weigh on stocks.