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2022Q2 Quarterly Inflation Outlook (single issue)


This is a single issue, of the May 2022 Quarterly Inflation Outlook.

Executive Summary

  • The price level still has far to rise (unless velocity stays stagnant or M2 declines).
  • “Toppy” conditions in the housing market are not likely a prelude to price declines.
  • The Fed needn’t destroy demand to rein in inflation, and a recession is not a recipe for meaningful disinflation anyway.
  • The Fed is wrong that approximately 2.5% is an equilibrium nominal short rate, now or ever.
  • Long-term real interest rates would be about 2.25% in equilibrium. Higher rates induce deleveraging and lower real rates induce leveraging of economic activity.
  • We increase our 2022 and 2023 inflation forecasts even further.
  • Asset market valuations are marginally better than in the previous Quarterly Inflation Outlook but markets are still very dangerously priced and we continue to urge caution.

SKU: 2202
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