Inflation Is About to Get Worse | Prof G Markets
TL;DR
Economist Mark Zandi warns that true inflation is closer to 3% than the reported 2.4% due to distorted October data and will likely worsen mid-year as tariff costs finish passing through to consumers, while journalist Liz Hoffman reveals the DOJ's antitrust chief was fired for blocking politically connected merger deals.
📉 Distorted Inflation Data 3 insights
October shutdown artificially lowered CPI readings
The Bureau of Labor Statistics assumed flat inflation during the October government shutdown when data couldn't be collected, causing subsequent year-over-year figures to understate true price growth by approximately 0.1% to 0.2%.
Fed's preferred PCE gauge shows hotter inflation
The Personal Consumption Expenditures price index, which the Fed uses to set its 2% target, is expected to register close to 3% year-over-year with monthly gains of 0.3% to 0.4%, revealing significantly stickier inflation than CPI suggests.
Quality adjustments and seasonal factors mask reality
Technical adjustments for product improvements and January seasonal effects are creating a gap between measured inflation and consumer perception, as regular purchases like groceries and gas feel more expensive than official figures indicate.
📈 Mounting Price Pressures 3 insights
Tariffs passing to consumers at 96% rate
According to New York Fed research cited in the discussion, businesses have passed 96% of tariff costs directly to consumers, with additional pass-through from businesses to consumers still expected in coming months.
Services inflation hits fastest pace since July
Services prices excluding energy jumped 4% in January, driven partly by heavy-handed immigration policies affecting labor supply and wage costs in service sectors.
Inflation forecast to worsen before improving
Moody's Analytics projects the PCE inflation rate will rise from 3% to between 3.25% and 3.5% by mid-year before moderating late in 2025 as tariff effects dissipate.
⚖️ DOJ Antitrust Shake-up 2 insights
Antitrust chief fired for resisting political interference
Gail Slater was ousted as DOJ antitrust chief after less than a year for refusing to approve settlements for companies represented by Trump-connected lobbyists, marking the end of internal battles between populist enforcers and pro-business factions.
Companies bypass enforcement via White House connections
Firms including HP Enterprise and major real estate brokerages secured favorable merger outcomes by going around Slater's office to lobby White House officials directly, with decisions reportedly depending on whether requests came from 'MAGA friends.'
Bottom Line
Prepare for inflation to rise toward 3.5% by mid-year as tariff and labor cost pressures intensify before easing in late 2025, while politically connected corporations increasingly bypass standard antitrust scrutiny.
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