RESEARCH CONTENT:
Until recently, the US experienced a 30 year period of stable low core inflation.
The recent spike was led by an immediate increase in Choice inflation, followed by Burden inflation.
Choice inflation has subsequently declined almost back to its 20 year range.
Burden inflation has also peaked but will disinflate at a slower rate (due to the way it is computed).
Tight monetary policy has caused a fast deterioration in monetary and consumer debt aggregates.
Monetary policy objectives target lagging indicators, raising the likelihood of higher rates for longer.
Current trends suggest a continued disinflationary trend.
Markets currently price stable inflation at ~2.65% for the next 10 years which is inconsistent with past episodes of monetary tightening.
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