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Inflation Peak ?

07/20/2022

One of the best and most venerable market strategists is Dr. Jeremy Siegel of Wharton.  His thoughts are always well-informed and well-crystalized.

Today, he thinks we may have seen the worst in inflation.  CPI and PPI numbers are backward looking – what has been, not what will be.  The Fed has both shut down the growth in money supply and aggressively raised interest rates.  Historically, that one-two punch has always reduced inflation – when executed aggressively.

Because high inflationary expectations can increase inflation ( it makes consumers are more accepting of price increases), reducing those expectations is critical.  The good news is that expectations for 5-10 years rates fell 70 basis points last month, which is great.  If inflationary expectations drop and money supply growth stops, the biggest worry reverts to the supply chain problems, which are also lessening.

When the Fed meets next week, he only expects a 75-basis point increase in interest rates, as inflation starts to cool.  Fingers crossed!!

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