Academy Securities: America is more faced with high prices than with new inflation out of control

On 10 August, Academy Securities strategist Peter Tchir presented an unusual assessment of current inflation in the United States: the core contradiction faced by the population may have shifted from “prices are rising rapidly” to “prices that have been raised before have not fallen”. By comparing Truflation with official CPI and core PCE, he found that Truflation was significantly higher than official data in 2021-2022, and that the situation is now reversed, with real-time indicators already significantly below traditional inflation targets. The authors therefore question whether the continued overdependence of the Fed on the more lagging CPI and the core PCE could overestimate the price pressures that are currently taking place. This view does not mean that official inflation has been distorted. The July Federal Reserve report showed that, as of May, the PCE ratio was still as high as 4.1 per cent and the core PCE 3.4 per cent, while official data did show inflationary pressures; at the same time, the most recent real-time United States CPI indicators were significantly lower. The real difference is, therefore, whether policies should be more focused on “the current rate of price change”, or whether the past price increases were still a sign of lag in official statistics. If the former were closer to reality, market pricing for further interest rate hikes could be hawks. Kim Xian