The qualitative details that the CPI data will contain will actually reveal how much we should worry about inflation. In the next process; We have to monitor inflation components based on supply chain, supply problems, China’s economic growth, production efficiency, dollar and Fed’s movements. At this point, we see that the main reasons for the loss of power in the temporaryness of inflation thesis are the factors that increase the turnover effect in inflation, which comes from the demand and wage axis. It will be necessary to state again; The Fed cannot control supply problems with monetary policy, but it can control inflation expectations.
Therefore, the reaction of the Fed should be interpreted in terms of the effects of the policy on inflation. Current conditions; It shows that the Fed may be in a position to increase real interest rates by accelerating more, if necessary, in order to manage expectations properly and not lose control of inflation. It is not at the stage of doing this tightening as an action yet, but faster tapering will show that we are on this path.
Inflation is expected to rise to 6.8% in the headline and 4.9% in the core in November. The supply-demand imbalance currently creates incompatibility in the market, and the temporary spending ability brought about by high wage increases and the extension of the maturity of the deterioration in inflation expectations cause demand to be a drag on this volatility concept. The effect of tight employment conditions continues with the increase in wages. The Fed has to contain the secondary effects as well. Therefore, tapering on its own is not a sufficient phenomenon, and it is necessary to increase interest rates at the point of slowdown in demand, and to reduce import costs with the strengthening of the dollar. Considering that the effect of the variants is also partial; economic activity is still active. Although activity is declining, the production shortfalls that cause it are causing solid inflation.
Kaynak: Tera Yatırım