One thing I should have made clearer in the last newsletter is that there's a large chance that annual and, say, quarterly inflation will be telling very different stories by late this year 1/ nytimes.com/2022/01/07/opi…
Suppose, for example, that core inflation Dec/Dec is 4+% while 4thQ average is 2.5% — which could happen simply because cost of shelter, which is 1/3 of the CPI and is more or less the average rent actually paid, spends most of the year catching up to new-residence rents 2/
In that case you could have headlines shrieking "eek! inflation" while the right read should be that the Fed has successfully engineered a soft landing. 3/
Obviously if even the three-month inflation rate is still running hot, which might happen, this won't be an issue. But the point is that the data will need a lot of interpreting (and there will be endless arguments about the interpretation) 4/
Another Kindleberger quote about the balance of payments (from memory): "People always want a number, but you can't just give a number, you have to tell a story." 5/
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