Inflation isn't high any more. July was 0% and August was 0.1%. The headline number looks at a 12 month window. Until the very high inflation months earlier this year drop out of that window the headline number will be high. But it does not look like prices are increasing much anymore.
All of the long term trends still point to low inflation like they did before Covid. Slow population growth, technology, and boomers aging out are strong forces keeping inflation in check. IMHO we are going to go back to worrying about deflation in the next 12 months or so.
The reason people find the 'zero inflation' headlines misleading are mainly for three reasons:
1) Aggregate month-to-month inflation metrics were flat/low due to gas prices falling, but many important categories were still quickly inflating. Notably rent, but also food.
2) The reason people normally reference 12 month inflation windows is because many things, like energy prices, are very volatile month to month. It is going to take time to really see the trends.
3) For things that skyrocketed like food, people are hoping to actually see the prices come back down.
So, yeah, you are correct on your numbers, clearly. But as an non-expert, I'm not really sure the current trends are positive. I think they are still pretty troubling.
The CPI was 255.7 in 2019 and estimated to be 294.4 for 2022. That's a 15% increase in three years in an index that's acknowledged to somewhat under-report inflation. CPI could flatline (zero MoM) for the next two years and we would still be at 3% annual inflation over five years, which is above the Fed's target, in addition to all the asset inflation we've had that the CPI doesn't really track. Absolutely nobody who pays real bills will feel like inflation has subsided.
> IMHO we are going to go back to worrying about deflation in the next 12 months or so.
There's a lot of money to be made in the STIRS markets if your prediction comes true.
You're right, but it's going to take either a while or actively lower prices before people will stop feeling like everything is more expensive than it should be. Psychology matters for the effects of inflation on the macro economy.
I've definitely altered my purchasing behavior because things "feel" too expensive, and a few months of 0% MoM inflation isn't going to change that. Either in two years I'm going to finally get used to a cart of groceries costing $250, or prices come down sooner.
All of the long term trends still point to low inflation like they did before Covid. Slow population growth, technology, and boomers aging out are strong forces keeping inflation in check. IMHO we are going to go back to worrying about deflation in the next 12 months or so.