Inflation the March report in April

Taper is coming to an end in February.

Will inflation be significantly reduced in March?

We will find out in April.

If so remember this…giving money to rich financiers created most of the inflation.

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Consumer price inflation was caused by giving money to consumers (3 rounds of Covid helicopter money) coupled with supply restrictions.

<Taper is coming to an end in February.

Will inflation be significantly reduced in March? >

No. There is a difference between fiscal demand/supply imbalance (to consumers, which causes consumer price inflation) and monetary tapering (to banks, which subtly changes interest rates). It could take a long time for inflation to subside. If the monetary taper causes a recession (as it has in the past) we could have stagflation. Which is no fun, if you remember the 1970s.

Wendy

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There is a difference between fiscal demand/supply imbalance (to consumers, which causes consumer price inflation) and monetary tapering (to banks, which subtly changes interest rates).

Wendy,

While those difference in the nuts and bolts exist that is not the story of inflation by itself.

The money supply whether boosted by monetary or fiscal policy creates inflation.

The monetary policy tapering or winding down was not offering anything but consumption.

The fiscal policies ramping up are offering productivity gains or deflationary forces in the mix.

The prior fiscal polices between 2020 and the fall of 2021 are long gone. Those were inflationary…in the first round or the beginnings of the inflation. Those monies are gone from the middle to lower middle class wallets.

All of the policies point to more money with the wealthy who are spending it regardless of prices because their investments and savings are high. Their disposable cash allows them to buy at higher prices.

The wealth effect in the equity markets was allowing more consumption by wealthier families. This is also winding down as the markets fall with the taper. Interesting how not giving wealthy families money coincides with the markets dropping.

Monetary policy wags the dog.

The talk of long term HIGH inflation is very urgent and very premature.