Submitted by GoldFix ZH Edit
Recently BOA outlined the possible paths towards a higher inflationary base from here. The theme seems to be Don't take disinflation for granted. Here are their observations bulleted. The consensus priced now into markets assumes a steady decline in inflation, which could be disrupted by any number of “imperfect endings” to the story:
• The US-led coalition has been ineffective so far in stopping Houthi attacks on cargo ships in the Red Sea. 28% of world container trade passes through the Suez Canal. Container prices have spiked 90% in recent weeks.
• Escalation of the Israel/Hamas war could cause oil prices to spike to $150/bbl according to Francisco Blanch; recent drone strikes and attacks have raised concerns the conflict could expand into Lebanon.
• CPI core services less housing (the Fed’s “supercore” measure) remains at 3.9% and has been steady around that level since June 2023; still almost double the 2% Fed target.
• In an executive order signed just before Christmas, the White House raised wages for government employees by 5.2% for 2024.
• The rate of housing starts rose by 255k homes in the past three months, the fastest pace since July 2020.
• El Nino, Black Sea grain deals & geopolitics risk higher food prices
Continues here
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