There’s a widespread view, or perhaps hope, that the US economy is either at or near peak inflation and that it’s set to decelerate from here. If so, then the big question is how fast it comes down, and how aggressively the Fed needs to hike in order to make it happen. But perhaps we haven’t quite seen the peak yet. In a note sent to clients yesterday, Omair Sharif, the founder and president of Inflation Insights, warned that we might not have actually seen the peak just yet in headline CPI. So I conducted a short Q&A with him, via Bloomberg’s chat tool, to get his sense of where things stand right now, and why the coast isn’t entirely clear just yet.
So to start. Before we even talk about why inflation may not have peaked just yet. Let me ask you the reverse. Why was there a growing view that March or April was the peak? Why does that seem to be the base case for many people?
Two reasons: base effects, and energy prices.
Core CPI in Q2 2021 averaged 0.8%, and that was unlikely to be repeated this year, so it was pretty likely that we'd see inflation drop over this period.