Inflation Reaccelerating?

Like I have been telling readers since it seems like forever. consumer level inflation was likely to bottom in September or October and then start to reaccelerate. Nothing likely out of control like the reaction to the expansion of money supply in response to the pandemic shutdowns. However, we do expect a gradual build up in year over year prices into next year. This really adds insult to injury as far as the American public is concerned after the cumulative 20% to 30% consumer level inflation over the past three years. Any positive inflation at all at this point, even reaching the Fed's 2% target does little for those still suffering from sticker shock at their local super market.

In September, headline CPI bottomed at growth of 2.4%, while Core CPI appears to have already bottomed over the summer at growth of 3.2%. According to the Cleveland Fed's Inflation Nowcasting model, October CPI is running at headline growth of 2.57% and Core growth of 3.34%. Interestingly, in the very first paragraph of the October 11th issue of Jim Grant's Interest Rate Observer, Jim speculated in regard to "a surprise second wind in the measured rate of inflation."

As readers well know, I rely upon the crew at Hedgeye Risk Management for much of my macroeconomic modeling needs. Hedgeye uses two distinct models to forecast their year over year growth rate for headline CPI and then creates one outcome form those models. Without giving away their store, because after all, Hedgeye is a business and I am a customer, their models are actually a touch warmer than are the Cleveland Fed's models for October and their models remain warm through Q2 2025.