Thread by @MBjegovic

Time to update this chart.

With everything going lately this may be the single most important chart to look at.

What do the latest numbers tell us?

A thread.

#inflation

1/16

https://twitter.com/MBjegovic/status/1621265212794863616

I made the quoted tweet on Feb 2 which was before Jan employment report, #CPI , #PPI and #PCE when most were still talking about great Dec numbers.

In the meantime most indicators showed higher #inflation numbers but, as I noted beforehand, that is only seasonality.

2/16

As I suspected, some took advantage of these seasonality numbers and revisions of SA data (#CPI) to wrongly point to #inflation picking up.

And even worse, the #Fed embraced this false narrative and hiked 25 last week despite the ongoing banking crisis.

3/16

Only a handful of ppl saw some of the huge policy errors at the time the #Fed did them.

But in hindsight they become obvious.

By 2022 ppl started to realize the #Fed should have started tightening back in Mar 2021 when #inflation was going up (1st policy error in 2 yrs).

4/16

But in Mar 2021, hardly any1 talked about rate hikes or QT.

To be exact, many (including the #Fed officials) thought #inflation would never be a problem again.

Ironically that was the time #inflation was already a problem, and was getting worse.

5/16

Similar thing happened during the summer of 2022 when I was pointing out to #disinflation and how #inflation stopped being problem after its peak late spring.

Many called me a 🤡, delusional, stoned and whatnot.

6/16

It is hard to grasp the #Fed actually decided to up their hikes after #inflation peaked and stopped being a problem.

Even 10M later they are still wrongly pointing to "high" and "sticky" #inflation.

7/16

Going forward I'd expect more ppl to realize the #Fed made a mistake by not pausing hikes in Sep 2022 (2nd policy error in 2 yrs).

And then only added a bomb to the fire by not cutting hard last week with ongoing banking crisis (3rd policy error in 2 yrs).

#inflation

8/16

What gives me conviction about #inflation not picking up and seasonality being the main driver of the recent #inflation numbers?

9/16

1) Leading indicators have tumbled so much that it's impossible to call it #inflation anymore
2) Even lagging indicators like #CPI (unadjusted which is less manipulated than SA) showed #inflation was actually BELOW the #Fed's target for 5M Sep-Jan:

https://twitter.com/MBjegovic/status/1625591926790492160?s=20

10/16

3) Unadjusted #CPI shows recent #inflation "pick up" was nothing but seasonality:

https://twitter.com/MBjegovic/status/1635778365637443585?s=20

11/16

4) Feb #PPI was negative showing outright MoM #deflation

https://twitter.com/MBjegovic/status/1635983611559116800?s=20

12/16

Finally, here is the M2 chart showing, by far the largest contraction on record (data going back to 1959) in the last 11 months from Apr 2022 - Feb 2023.

I'd suspect this contraction accelerated in Mar due to credit crunch as a result of the banking crisis.

#inflation

13/16

Still there are a lot of important Qs at the moment:

1) What does that all mean for the official #inflation figures like #CPI going forward?
2) Will we have a #recession, how deep will it be and for how long?
3) Will the #Fed cut, when and how fast?

14/16

This thread took a lot of time and effort to write.

If you like the content, please love and retweet tweets of this thread to help me spread the message.

Thank you!

15/16

Recently introduced a new service

Marko's Brain Daily

where you get all the relevant macro data (forecasts and analyses) each day, including #CPI and other forecasts well in advance.

Use it for 1W completely FREE of charge!

If you want to get included, message me.

16/16