Prieur du Plessis Sees Higher U.S. Inflation Ahead

He uses several graphs to make his point, most of which focus on the unadjusted and GDP-adjusted Purchasing Managers' Index for prices. Based upon past performance, he concludes that the current rise in the PMI for prices suggests that the recent dip in the CPI is a temporary phenomenon. Not only the gold market but also the T-bond market is indicating that inflation may come back. He also notes that the recent rise in oil should give an added bump to the (non-core) CPI too.


He made some good points. I would like to add one of my own, relating to Fed responsiveness: although no-one at the Fed has come out and said it, the current easing was in part prompted to deter a possible second phase of the residential real-estate crisis. I'm referring to the option-ARM resets, which are scheduled to peak next year. The Fed's quantitative-easing program, although it had a Treasury component, focused mainly on getting mortgage rates down so as to ease the reset/refi burden as well as encourage demand for housing. As long as that refinancing overhang is there, the Fed is likely to be non-responsive to any pickup of inflation. It has so far.