Inflation Rate Predictions

[13:26] the Fed cannot control real assets as we're talking about gold now and silver and copper and aluminum and rare earth and uranium oil. It has it has no ability to control the supply chain at any level. So the idea of it being an arbit any central bank of of inflation by the tightening of some money in the long end is is is a bit it's it's a bit arbitrary.

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[24:54] I think is going to guarantee us a huge inflation bounce in the third, fourth quarter

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[6:08] I've been of the belief for the last couple years that uh 3 to 4% is the new inflation normal uh no longer 1 to 2%. And I still think that's the case.

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[27:41] The hyperinflation will eventually arrive because look at what the debt is doing in every country. It's going through the roof and that's printing money and it's going to come back to roost in Main Street with groceries, you know, all taking a hike in the near future and it will continue to accelerate till it's people are really going to notice um in uh in the coming year.

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[17:20] the inflation numbers that just came out that the Fed was looking at, the headlines were scared about are going to creep down because they're not pricing in what was $110 to $138 oil for that aberration in that quarter. And then going down to 95 110. They're going to start to price in that 70 80 level, that's going to bring numbers down.

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[23:33] The government will tell you that the dollar is losing its purchasing power to the extent of 2 and 1/2% a year. The real number for your family is eight.

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[6:14] inflation numbers that were just posted in the last one or two prints are going to come down.

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[7:22] Inflation is not going away. But that it's not going to be in that sort of high 3 4% range when we see the next prints.

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[4:45] the in the CPI number could be weak uh for July and August

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[17:02] I think I think we have uh an a problem with underlying inflation. I think underlying inflation is around 3%. I think if anything it's accelerating rather than uh rather than decelerating. Um I think the risk uh of uh an acceleration of underlying inflation is greater than the risk of a deceleration in underlying inflation.

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[6:19] you're looking at 5 6 7 8 9% inflation for the next decade.

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[29:27] when that gets washed out, we're going to see zero inflation for the rest of our lives in the developed world.

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[30:10] At some point people will realize that inflation is not here. There's no inflation... So there is actually a disinflationary impulse from this... there's no inflation coming. This is completely wrong. Completely wrong.

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[4:38] We're currently annualizing at 8% on headline CPI on a three-month annualized basis. That's going to come back down and and we're going to be off, you know, we're, you know, the markets have appropriately priced that that's going to come back down

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[35:08] They are forecasting that bond yields have peaked with the inflation number that peak that that came out really hot last month. So, there's they expect that inflation's going to cool off as we go through the rest of year.

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[19:42] our forecast for this year for core PCE is three spot three. Worst just guided us to that exact number two weeks ago.

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[37:43] Again, we're going to see negative prints on headline CPI. It's I mean, it's just it's it's going to happen.

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[9:40] Yeah, know I could certainly see that happening certainly with oil prices having come down um in the last month or two already. That's going to be the big swing factor in the headline number which is what these numbers are. Um and and so I think there were some other factors that are probably keeping the CPI up a little bit lately. So I think yeah, we could see a little bit of slowing from the 4.2% rate, which is, you know, pretty high for as these things go um in the next month or two.

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[33:41] even housing inflation rental you know prices in aggregate have been slowing down quite a bit for a couple years now um and I think that's probably going to continue as well um just from you know less demand from from you know lower immigration and the fact there has been at least some building going on

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[27:02] I think the highest odds are, you know, you're going to be in an inflationary boom.

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[4:01] I think that we're going to continue to see inflation be sticky, if not a problem, as real world assets get repriced

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[19:00] there's an underlying inflation problem... the dotted line is the correct number. It may be coming down, but it's not coming down fast and so underlying inflation pressures are clearly there and therefore the Federal Reserve has got to act.

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[27:13] I think they're going to try to work it that hey, 3% isn't so bad. Because it'll be four or five at that point in time.

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[26:37] he's probably going to word out this 2% target. That it's either going to become a number that yet determined or something higher than 2%, and that way it will be more understandable to accept a higher rate of inflation than for 6 years keep missing a number that you don't get close to achieving.

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[21:43] there is a bulge of inflation that's coming even if things normalize and peace is achieved

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[35:01] there's a bunch of reasons why inflation isn't going away and for people who just say well the biddles conflict is done or at least dying going down uh and therefore inflation won't be an issue. Uh I think they're missing some of the plot and it's a pretty big plot.

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[14:08] we're going to have inflation because that's how we pay for government. And the Fed is going to enable it under Walsh just the way it's enabled it under his predecessors. Uh, the gold market, the silver market don't get that yet. They will.

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[28:39] I think inflation is going to surprise to the downside. And all the reasons for the Fed to swing hawkish is they're going to pivot the other way.

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[7:35] Do you think we will see the definition of inflation adjusted? Yes. It has to happen, Julia. How else do we get there? You know, if you're Kevin Warsh and you want to minimize rate hikes so you don't tank the economy, well, the only way to do that is to change the definition.

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[17:24] I do think again as long as the ceasefire continues, that that should ease in the back half of this year. That we no longer have that kind of rising inflation uh that we that we saw uh in the past few months. And there's really no signs that we're we're we kind of have a breakaway inflation like we saw in in 2021, 2022... I think inflation's still probably going to be stickier above 2%, uh but I I I think it could be correct that it it it goes kind of sideways to down uh in the coming months.

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[14:57] I think I think we've got inflation baked into the next 5 years at least, maybe longer.

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[9:25] the probability that we have a pretty nasty inflation shock later in the year, the summer driving season with a World Cup... you've got the summer driving season. You've got a lot of key supply chain disruptions that all around the world and like it's just that sulfuric acid situation that are going to create this like inflation bounce through the year and that's going to move money probably from growth stocks over toward value stocks.

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[12:08] For those that talk about in you know technology with AI is going to be deflationary that you know we we're in a long-term deflationary pull. That's over. That is over. This is a different inflation cycle. You cannot expect us to go back to that other cycle that we had from 2010 to 2020 because we're not showing any indications of that. And now we're starting to move back up with inflation again.

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[14:24] even if oil price doesn't go up it is going to take a while for inflation to come under control. All of those say to me in answer to your question that interest rate increases perhaps more than one is more likely than interest rate being kept the same or even cut as the president would want it to happen.

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[18:28] We do have the opportunity, should things work out, uh, to see inflation move back down. But even if it moves back down, David, if if the Fed's going to truly maintain a 2% target and we're at 4.2%. Um, it might, let's say it takes it to 3%. We're still well above the Fed's target.

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[6:25] inflation comes in two waves. The second wave is always worse than the first. So, for anyone out there who thought, 'Oh, 2021, right? What we saw a couple years ago, that was the worst of the inflation.' Buckle up because you cannot continue to print the way we've printed.

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[10:04] We are entering an era of permanent inflation. The the Federal Reserve doesn't even wait for the uh the rates the inflation rate to come down to that 2% target before they start cutting rates. They're so anxious to cut rates. So that means more inflation.

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[35:22] If you believe, as I believe, that the debt and deficits that we face in the United States and Canada will increase rather than decrease over time. The funding mechanism, the only funding mechanism that seems to me to be available is artificially low interest rates to lower the interest component on the debt and quantitative easing, which is to say spending.

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[15:38] That 4.2% will probably be a peak. David I remember well it was almost it was July of 2008 inflation's CPI peaked at 5.6%... The key thing I like to point out is since that bottom in crude oil and so in CPI in 2009 at minus 2% we've bottomed around that level or zero three times. I think we're going to do it again by this time next year.

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[39:11] We have 4% you know on CPI today PCE and core PCE coming in even you know stronger than those types of things. Uh you know Fed's going to be forced to raise interest rates

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[39:30] I do agree with it and I think I I mean I don't have a big inflation view because I think that we are going to be seeing disinflation uh in the service sector uh which dominates the economy but I think we're going to see inflation in the good sector or the product sector uh more broadly speaking

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[3:24] The uptick or rather the bottom was before the war. So both CPI and PCE already started to rebound before the war and they're just going higher. So I don't think, you know, I don't think it holds any water to say, oh, it's just transitory. Oh, it's just war.

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[7:18] in this type of environment, if we think the true rate of inflation is going to be skewing more 3 to 5 versus the more historical, at least targeted benchmark of two, I think that you should be looking at a minimum hurdle bench rate benchmark rate of return of around 10% in these assets.

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[28:37] I I think so. I mean, with commodity prices so high, particularly with energy prices so high, um I think that's the environment that we're in. Um and so unless something changes really on that front, David, I think we're going to have, you know, inflation numbers that are slightly more elevated than certainly expectations were at the beginning of the year.

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[26:17] I actually think there's a pretty decent chance that it's not a break the glass big print this time around, but that it's more of a run it hot big print. In other words, you know, he cuts the rates, the credit starts to grow again. You know, we get all this AI buildout. Unemployment stays quite low. Um, but we have serious serious inflation and the Fed just says, 'Well, you know, we're not going to deal with that because we've got this industrial policy.'

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[0:21:57] we're going to have higher inflation and that the knock-on effects of the bottlenecking and the even just slowing it down assuming it starts to move to some degree. Um the increase in costs that is as we mentioned the things like insurance cover shipping and everything else uh is going to have a ripple effect of stagflation um right the way through and that's going to make everybody's living's costs a lot higher.

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[36:05] even if it changes tomorrow you're still going to have at least a month or two of filtering through over 3% inflation. The Fed likes it below 2%. I personally think that's a hard number to to get to

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[23:03] we can see inflation basically keep rates where they are in the short end, but in the long end we can see more bond buying.

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[11:27] I think that inflation will prove itself to be far stickier in part because the hormuse crisis is not that existential. In part because consumers can weather 90 to $100 oil.

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[10:52] the inflation genie is out of the bottle in the United States and it's not going to be put back anytime soon. Th this will be with Trump and one of Trump's big Achilles heels throughout uh at least in the foreseeable future. So that means maybe throughout a big chunk of his second term, he he's going to have this inflation problem around his neck.

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[10:01] we're still going to see much higher inflation this year. Julia, I haven't changed that prognosis. Double digits still. Yeah, I think so because we're going to see shortages in some really important commodities, things like fertilizer for the farm for example, and that cost is going to get passed through consumers.

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[21:00] yes yes and yes... we ultimately have to figure out whether or not the Kevin Walsh Federal Reserve is going to look through uh these sticky inflation pressures... The only thing that's negative is sticky inflation. And in our opinion, we think the sticky inflation thing may cause some problems uh once we get uh maybe you know um you know may cause some problems over the next let's call it 3 to six months.

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[6:59] I think the Trump second term in its entirety is going to uh deliver a bigger increase in the cost of living than the Biden term. So it's going to be a bigger problem inflation in Trump's second term than it was under Biden. uh especially in the last two years. I think that's where it's going to be the worst. Under Biden, inflation was the worst during his first two years, but I think in Trump, it's going to be the back end of his term, the last two years where inflation is going to be uh the worst probably into the double digits.

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[33:28] I I think we were what were we upper teens or something in the in the late 70s? I I'd be willing to bet we're probably going to go back to that level. I don't think we're going to hyperinflate, but I think we're going to have some pretty bad inflation years ahead.

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[7:22] So you're going to see inflation by it was 3.8% last month in the US CPI, you're going to see four, you're going to see 4 and a.5%.

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[2:28] we've entered a generational time of populism... deglobalization, and rising structural inflation... This is when you start to see commodity scarcity because if we start splitting up and doing protectionism... inflation through fiscal spending and fiscal dominance ends up slowing things the broad growth and definitely profits down

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[10:05] they came into the year with inflation core PCE falling to mid twos or 2.5 or 2.6 at the end of this year and now it looks like it will be closer to three or even higher than slightly higher than 3%.

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[11:51] I think Wall Street has very well priced in a peak inflation in for May. So what you have shown here is the May CPI print and if you look at the fixing it's pricing in a declining a disinflating year-over-year. So markets think that May is the peak. We also have have been saying that May is the peak. So inflation will be falling.

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[24:09] on our work by the time we're in 2028 probably going to see us and global inflation in double figures. That means that the bond investors want a return on their money. So bond yields will be even higher and you have debt invested. Well, it's going to crash.

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[3:52] you're going to get higher interest rates and inflation is coming for sure it's well it's it's about to land

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[8:21] I can't imagine that May is not going to come in a good bit higher. I'm talking about maybe four and a quarter or higher and then and then you probably go to four and a half or maybe four and three/4ers by the time you get to the fall.

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[12:27] the demolition of the of the purchasing power of the currency is is virtually inevitable. So housing is going to become more more challenging. That's why real assets are soaring in value.

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[12:00] so should deglobalization be get the opposite. So we should expect to see... the path for interest rates is higher not lower. And the same with inflation.

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[17:49] this idea that um you know the inflation will go away and that if Kevin Worsh just sits aside for a little while and gives it a minute, he'll have an opportunity to cut later is probably incorrect.

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[10:19] inflation is after the last two readings of higher rates is going up. You know, is it going to stop at is it going to get to 10%. I don't have any idea, but it's going to get to six, I would say.

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[27:40] you're seeing, you know, as some have pointed out, um, the whole kamay thing, it started out with gold. That's moved to energy, food, depending what you're looking at, starting to really pick up like meat prices... it's starting to permeate. And then you look in the sector in the in the service sector inflation is kind of sticky.

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[17:42] I think you're going to see a smaller but equally as profound effect with Kevin Warsh. And so, I I've got my hopes hung closely on that.

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[22:41] it will be very difficult uh for a good Fed policy to even with a price rule to bring that down sufficiently quickly to not have a real serious bout of inflation in the next 3 years.

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[18:38] It's going to be highly inflationary. We're going to have high inflation for sure, you know, really high inflation because America has to go there. It has to print money to do it.

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[1:29] Yeah, I think that um we're going to continue to see inflation running similar to what we've seen uh in the last little while 2-3%. I mean it's a little bit higher today and that's wasn't necessarily a surprise given the the jump in oil prices as a result of the uh the war in the Middle East

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[21:46] before the war began um I was still saying we're we will have an inflationary boom in 2026 and for some of the reasons you've just mentioned number one there was one big beautiful bill.

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[4:10] The inflation number you asked about, I think there's more where that came from.

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[22:01] I have been a firm believer for quite some time that that inflation was going to be a problem. You and I have talked about that in the past and um that's still going to be an issue.

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[30:50] I think we'll see inflation moving higher simply because the money supply has been accelerating. So, so we got two two different things going on. And the causality in inflation runs from changes in the money supply to changes in inflation.

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[2:14] we are in an inflationary age, you know, the 2020s or an inflationary era that is going to persist for for quite some time.

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[6:33] They're all saying, a lot of them are saying is going to be stagflation, stagnant economy, and rising inflation. No, it's not. It's going to be drag inflation, declining economic growth, and rising inflation.

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[28:10] it doesn't have to be an explicit default. We can have a de facto default through inflation, which is the most likely path forward for a lot of these countries.

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[11:15] once you get that down you still have the issue of what's going on even prior to those oil price spikes and that's where I think you get this longer term high-end inflation probably between three and 4%.

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[6:55] instead the inflation is moving away toward the 3 to 3 12% range

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[2:24] You're going to get inflation of 7, 8, 9% for 5, 6, 10 years. And it's here. It's arrived.

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[30:40] So instead of a loaf of bread selling God, I couldn't believe that recently uh for $9 for a loaf of bread uh and it's really unhealthy stuff at the same time. Uh so you're going to see a loaf of bread for $50 or $100 and people are going to pay it if they want to eat bread.

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[30:46] Inflation at 3.5 by the end of the year or three? Uh, two.

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[21:01] inflationary pressures are there and uh uh if the and the it's the kind of inflation that is inflation due to oil shocks that is very hard to combat because really uh the shocks are real. This is not just the Federal Reserve spitting out too much money. This is real resources becoming less available.

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[15:46] So, we're we're going to see much higher inflation.

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[7:56] we think the next two decades is going to be different in that it's going to be a lot higher on average and it's also going to be very volatile. So there's going to be periods when inflation's accelerating a lot, periods when it's decelerating a lot, but in general it's going to be significantly above where it was uh for the last two decades.

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[20:39] we really think that inflation will go on up all through the rest of the year eventually go over 4% at the end of the year

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[26:31] re inflation rates could come down pretty quickly when we're out there in the summer, you know, early fall

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[6:01] you're about to take off now on a new run in inflation

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[29:51] Uh the answer is by the end of the year down. I think CPI or PC, whichever one you want to measure, they will peak around uh August.

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[18:00] we're going to see that accelerate over time. And with the actions that governments are taking, continuing to add to the debt, focusing more on spending versus cutting the spending, we're going to see that accelerate over time.

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[26:05] So on Friday the latest CPI numbers come out. And they're going to show the effects of the Iran war and they're going to show headline inflation going spiking in a quite dramatic way.

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[27:13] most of the serious economic models suggest that the oil price shock coming out of Iran will have quite a large effect on headline inflation but actually very very muted effect on core inflation.

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[5:33] we're going to have a supply shock the likes of which we haven't seen since the 1970s.

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[8:55] The inflation story is still going to remain with us uh even when this war ends.

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[35:09] No, I think inflation's heading back to 2% or even lower.

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[13:35] Plus, we'll probably see that with the March CPI coming out that'll be I think substantially higher.

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[13:25] I think we're heading towards very strong deflationary environment which however could be countermanded by political and fiscal actions.

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[1:58] I do think that inflation is is likely to stay higher for longer.

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[9:48] one of the takeaways in my big picture macro analysis is that we're going to see the next leg up in inflation

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[9:31] you've got uh increasing energy costs that's going to cause uh increasing inflation

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[17:19] I fully expect this number to be close to to zero by this year, if not next year.

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[11:11] those uh numbers will go up and we're looking probably at a 5 to 8% inflation problem for a period of time as that goes through the supply chain.

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[0:00] So inflation is going to continue to accelerate. Inflation is going to go into the double digits and who knows it may even go into the triple digits.

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[2:18] I mean, I if people think inflation's coming down over the next couple of three years, I think they're going to be very disappointed.

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[25:54] I don't think the Fed is going to be able to put that genie back in the bottle. meaning what what's that 2% or less? I don't think it's going to 2% or less.

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[32:41] I think it's going up. I think I think it's going it's going it's going up. It's going to it's going to drift up.

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[3:47] The first part of the year we expect to be a Goldilocks environment where inflation is still tamed from those factors we talked about last time. Those three factors are still holding inflation down.

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[5:52] I think inflation is sticky and probably heading up.

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[6:18] potential chair WH if he's confirmed um will not necessarily be battling inflation, but battling its its evil stepsister, disinflation.

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[10:59] I think we have a dishonest default, which is to say that we honor the nominal value of our obligations while we inflate away the net present value of our obligations.

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[32:43] I don't think this loosening will allow the Fed to get back the genie of inflation back in the bottle and get down to the target of 2%. I think that's the real problem and that's going to be a big problem for Trump

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[13:16] And in the first half of the year, we have inflation dropping towards 2.25%. the street's still at like three, you know, for the second quarter. That's way too high.

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[20:46] I think in the next three or four years, it's reasonable that we're going to see even official numbers show inflation's running at 7 8 10% maybe more.

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[17:24] 2026 I expect the inflation rate to be anywhere 3 higher than 3%.

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[10:10] I still believe that we're not going we may go to 2% from a rate of change standpoint for a period of time, but I don't think we sustainably stay there... I expect inflation volatility and to my point as you mentioned that I made last year, I don't expect us to go to 2% and magically stay there. We may go to 2% temporarily but I expect a real acceleration thereafter. Bottom line is I think inflation volatility is here to stay

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[22:54] we're talking at 4% inflation

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[25:06] In other words, we could easily be looking at sliding right below the Fed's 2% target going into the new year with this gauge that I follow.

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[4:08] I think it's safe to assume that next year at this time inflation will be quite a bit lower than where it is now.

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[27:09] I tend to think that it's going to happen in the next six months. Maybe a year at the most.

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[34:14] I personally believe that in this next cycle, we'll break double digits. The last cycle we went up to nine.

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[10:50] you know the Federal Reserve may try to lower rates more but they're going to be struggling with sticky to higher inflation. And interestingly also there's a 67month cycle in the unemployment rate and we're also into a rising unemployment trend according to that cycle uh as well that still has some room to run. So yes, we are seeing higher pressures on unemployment and we've been we anticipated those a while ago. So there is pressure for the Fed to lower rates based on higher unemployment, but it's happening in the face of persistent and sticky and probably even rising inflation over the next 12 to 18 months.

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[10:09] I think in 12 15 months from now which I think inflation will be back up again

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[16:53] I think in generally inflation is going to be sustainable though. between three and four.

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[5:29] I think happen again on Friday with the Fed's favorite measure the PCE core inflation rate which is going to show an increase

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[12:09] you're going to have higher inflation in the coming months of this uh half of the year and perhaps at the beginning of 2026

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[24:18] I think there's definitely a chance that you'll see an uptick in the next month or two as well as some of these prices again come through with a slight lag

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[3:59] We are still in a downward trajectory for inflation and the reason for that is that inflation is always an everywhere a monetary phenomenon. So you have to look at what was going on a couple years ago with the money supply to get some idea of what's going to be happening with inflation today or tomorrow. And since the money supply two two and a half years ago was actually contracting, it would indicate that we'd stay on this downward trajectory.

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[28:31] So in the next year we shouldn't be concerned about doubledigit inflation or high single not double digit inflation maybe high singledigit inflation coming back. You know people have painful memories of 2020 and 2021. So

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[21:54] I think we have a circumstance that resembles very much the decade of the 1970s where according to the Congressional Budget Office, the US dollar lost 75% of its purchasing power. Stated differently, we had several years where the official inflation rate in the United States was in double digits, compounded.

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[6:26] I would expect inflation to continue to creep higher, not just because of Trump's tariffs. There's other factors here. We talked about the deportations having an impact as well. But also, I would just point out is that one of the biggest drivers about a year ago of inflation was the stock market. And the stock market was at all-time highs. We had the big correction in March into April. We're now back at all-time highs. So, the wealth effect, people are feeling that again. They're feeling well. they look at their 401ks up 25% since April. That's a huge move that makes people want to go out and spend u on goods for instance new TVs etc. And so I think that that can also play a role here. So I think a combination of all those things that I mentioned you will see inflation continue to hold up. Again I don't expect a massive spike unless new high tariffs of 30% go into play. But is it going to stay stubbornly around 3% inflation? I actually do think so.

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[18:15] if you're looking conservatively at 10% inflation compounding per year, I think it's closer to 12. Some say it's could be as low as eight, but if you're being generous and we have a 10% actual inflation, not the Misfit Island of Misfit toys at the BLS telling us it's 4.2.

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[25:10] this is probably, you know, a later second half story before we can really uh make a good case or or or a good judgment about whether or not higher tariffs is actually flowing through to domestic prices. That being said, the idea that there's going to, you know, the idea there's going to be a sort of a more significant, you know, wage spiral or inflationary spiral here, we're it's probably not going to happen. And so, you know, it's almost certainly not going to happen. We're talking about 50 or 100 basis points on core PCE at the most in terms of the flow through of the tariffs

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[1:01] I actually think they are right and I actually do think inflation is coming. Uh and I'm talking about over the next few months because of tariffs.

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[28:03] it won't be runaway it won't be fair but it could be five 6% again in the next two or three years

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[10:25] I do think that inflation from this is coming. But I understand the technical reason why Powell dismisses it. [...] So, I do think we're going to see this higher inflation or this bout of inflation near-term. I think that's coming

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[11:20] I think eventually you you will have higher inflation. Maybe not here in the next two or three months just because of sort of the base effects you're looking at, but when you get into, you know, adding these tariffs on things that happen, you should you should get more inflation. I I would guess that you would.

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[12:01] we think inflation over the next decade will yield somewhere between three and a half and five.

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[16:44] I think it it might even hit the Fed's target at 2% or maybe even a little below this year

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[24:13] I think between now in mid year that that's when you would get this breakdown in in in the yield probably because the economy the market whatever maybe all of it together but later on I'm talking about in the latter part of this year and then end of next year your Inflation Rate goes back up again

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[24:31] we felt all along it's going to average for the next decade it's probably going to average three and a half or 4% on average that means sometimes you'll have it at five or six

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