Have we reached peak inflation?

Anyone else starting to get the feeling we may have reached peak inflation?

While the bears are still frothing at the mouth, hoping for 50% price falls and double digit interest rates, in the background some of the leading indicators are starting to fall quite quickly.

Commodities are falling sharply Iron, copper, energy all now trending down. Consumer sentiment is crashing, more and more talk of recession risks. Share-market bounced last week and bond yields have done a 180 degree U-turn, same trend for cash rate futures.

RBA and gov are both vocalising need for lower wage rises, will be used as justification by employers for keeping a lid on pay rises. Plus skilled migration is yet to really kick back in fully. I work in logistics and we are seeing improvements in both cost and availability of sea freight.

No doubt the next quarter or two are still going to show some big inflation numbers, and hard to see the RBA not maintaining momentum on rate rises over the next few months, but I am starting to see some early signs of hope that by 2023 the outlook may look a lot better.

 

No chance... This inflation is a sticky as chewing gum on your boot.
It will be here for at least 2 years.

 

Really feel its just starting.

There are food shortages starting in some developing nations already. There are some countries starting to withhold food export in order to hold strategic reserve. Plus capping costs in sunflower oil and chicken in South East Asia.

Ukraine issue has decreased grains, wheat and fertiliser. Expecting lower food production and food price pressures in the coming years.

Then there is energy flow through in prices. Inflation only has upside into 2023 is my view.

 

Australia will feel some pain. But it is not as bad as other nation that depends on import of hydro carbon fuel and food.
We are relatively shelter if you think about it.
It doesn't stop the business to try and gouge prices because they can. It is a fine art in itself.

 

The pressure will be export prices for our agri goods. That and our product will cost more due to fertiliser prices as well.

And we are only talking about how food may play out next year

 

Meh, the media beating this up better than they beat up covid, maybe we all struggling that much we need another 100billion job keeper handout.

 

Only problem is the road has ended. When they did this during COVID, the interest was 0.10%-0.30% for Australian Federal government to raise. The rate now is 4.00%. Also, the debt level has now being added significantly.

We could add more and get to US debt to GDP level.... but we are not the US with a reserve currency

 

Lettuce are $10 - media the war in Ukraine is causing inflation. Farmers, dam been raining for 12months so hard to grow lettuce. RBA here's our chance let's slaughter everyone while lettuce and petrol are expensive. Haha that's my spin on it

 

I'm not convinced, a lot of those soft commodity price rises are just the second order effects of high energy/transport costs. Agree they will flow through to the next few quarters, but then what?

Bear in mind too, prices don't have to fall for inflation to reduce, just stop rising as quickly. Barring unforeseen things like escalation of war etc, what will drive this? Especially in an environment where cost of borrowing rising, companies and individuals are tightening the purse strings and multiple countries heading toward recession.

 

Our government debt is through the roof thanks to years of mindless spending by the liberal party. You’re bang on the money in saying that we can’t create more money simply because we cannot afford it.

The chickens are indeed coming home to roost

 

The way I look at it is, we were on a predictable course of low inflation and low wage growth since the GFC.

The handouts and QE c/o COVID changed all that and the course was altered drastically last year and in 2020.

So the only question is how long it will all last? I don't know but we're into 12 months of this now and IMH (2 cent worth)O, not at the peak but approaching it.

Once we start to see a a significant deceleration.....and I don't mean inflation back to the target band per se but trending down, the RBA will hold fire.

And from whence we came, we shall return eventually. It'll probably take twice as long for the balloon to deflate as it took to inflate.

 

I was in the 'inflation is just transitory' camp, but the more I see governments around the world - most notably the US - trying to buy their way out of this with inflationary relief packages and price controls, we're in this for the long haul.

Australia's inflation is yet to peak, but high inflation is here to stay for the time being. Consumer spending will eventually tighten and a long, drawn out mild recession will follow.

 

Yes, RBA is hoping that inflation being the rate of change will slow in 2023. Especially with hopes that energy prices will come back down thereby adding a negative delta into the CPI basket.

All I'm pointing out is there is more upside risk of a structure spiral that will lead to ongoing high inflation prints if RBA doesn't go hard enough in 2022. Right now, RBA's messaging and position don't seem hard enough for my liking.

 

The thing about the liquidity tap is turn off. But there is enough liquidity sloshing around for the next 12 months to keep the inflation pressure high.

If they are serious about tackling inflation. They need to do QT and do it big.
It will be more effective than an interest rate hike.

 

Historically 5%-7% inflation is nowhere near “peak”.

For whatever reasons, it’s all about demand exceeding supply.

Remember the 1980s???

 

Nope I don't remember 80s. I was still a baby back then.

 

The energy crisis will be the next source of inflation that will become embedded.

That inflation wont start until this Friday. (1st July)

 

How very specific haha

 

Industrial metals equity index (down 30%)



Agricultural commodities Equities index (down 20%)

 

If you want specifics...

.. And won't turn up in the inflation figures until 26 October 2022.