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2021Q4 Quarterly Inflation Outlook (single issue)


This is a single issue, of the November 2021 Quarterly Inflation Outlook.

Executive Summary

  • The “inflation is transitory” meme is dead. It is no longer defensible to argue that the current level inflation is merely the result of supply chain issues emanating from the COVID pandemic shutdown and restart.
  • There are many ways to look at the distribution of price pressures. They are all showing that inflation is broadening throughout the economy.
  • With the end of the eviction moratorium, and as expected, rents are jumping higher to converge with the substantial rises in asking rents over the last year. This provides a following wind to core and median inflation in 2022.
  • Importantly, the cause of this debacle is demand-side, not supply-side. It was caused by the uncoupling of the recovery in production from the recovery in incomes, thanks to massive transfer payments financed by Federal Reserve money creation.
  • Shortages are unmeasured inflation; as shortages ease, prices should resolve higher, not lower.
  • Market-expected forward price levels continue to rise. The Fed is now beyond any average-inflation-targeting threshold and is behind their own definition of the curve. Appointing Lael Brainard as the next Fed Chairman, which we believe is likely, will probably worsen this by causing a premature end to a taper or much delayed rate hike.
  • We launched a new podcast!
  • We nudge our forecasts higher, but for the first time in a while the markets are at roughly our level.

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