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Inertia Creeps
The US publishes its last inflation data for the year on Thursday. The anticipation is that numbers will continue to be in line with the controlled outcomes to which the country has become accustomed. As this will be a column on the risks of a resurgence, it is important to start by making clear how utterly anchored inflation has been in this century.
For 10 years, core inflation and inflation expectations have been anchored
Neither has ever exceeded the Federal Reserve’s upper range target of 3%. Actual inflation dipped below the lower limit of 1% for a few months in 2010, in the aftermath of the Great Recession, while expectations briefly dropped below that level during the worst months of the global financial crisis and the Covid shock. Both times those deflationary shocks were over within weeks.