Inflation: Not Going Away

seekingalpha11-20 04:36

American politicians over-stimulated the economy in 2020-2021 to prevent a financial disaster, leading to persistent inflation concerns affecting the 2024 presidential election.Despite the Federal ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nInflation: Not Going Away\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-20 04:36 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4738781-inflation-not-going-away><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>American politicians over-stimulated the economy in 2020-2021 to prevent a financial disaster, leading to persistent inflation concerns affecting the 2024 presidential election.Despite the Federal ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738781-inflation-not-going-away\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"NDX","symbol_name":"纳斯达克100指数","start_time":0,"source_url":"https://seekingalpha.com/article/4738781-inflation-not-going-away","article_id":"2484903597","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1551007220/image_1551007220.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484903597","pubTimestamp":1732048592,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Well, if we divide up the market yield on the 10-year U.S. Treasury securities into an expected real rate of interest and an expected rate of inflation, we fin","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"NDX":"纳斯达克100指数"},"translate_title":"通货膨胀：不会消失","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NDX":0.9},"content_text":"American politicians over-stimulated the economy in 2020-2021 to prevent a financial disaster, leading to persistent inflation concerns affecting the 2024 presidential election.Despite the Federal Reserve's quantitative tightening and the reduction of its policy rate of interest, inflation expectations have risen, pushing long-term bond yields higher.Investors now expect inflation to rise to a compound rate of 2.40% over the next decade, up from just 2.00 percent in early September.The Federal Reserve's efforts to return inflation to 2.00% are unlikely to succeed, as the investment community expects rising inflation rates long-term.   Dragon Claws  Recently, there has been a plethora of articles examining the role that inflation has played in the economy and in the presidential election. For example, on November 18, Nick Timiraos posted an article in the Wall Street Journal titled \"How Democrats Blew It on Inflation.\" On November 12, the Financial Times posted an article by Sam Fleming, Valentina Romei, Olaf Storbeck, and Ilya Grodneff titled \"Consumer anger over inflation leaves a toxic legacy for West's politicians.\" And, there are many more. The narrative basically is that American politicians, fearing a repeat of the Great Recession of 2007-2009, over-stimulated the U.S. economy in 2020 and 2021 in an effort to prevent a similar financial disaster resulting from the spread of the COVID-19 pandemic. Consequently, inflation and the threat of inflation have spread through the U.S. economy and have even, many are arguing, dominated the results of the 2024 presidential election. And, the concern remains. The explosion of \"helicopter money\" aimed at combating the threats of another \"great recession\" has left the United States with lots and lots of cash still hanging around. The impacts of an inflationary environment are still around. Here is what the Federal Reserve did with its securities portfolio during the past four years.   Securities Held Outright (Federal Reserve) The Federal Reserve pumped more than $4.0 trillion worth of bank reserves into the commercial banking system. The Federal Reserve has been conducting a policy of \"quantitative tightening\" for more than 2 1/2 years, but there still remains a lot of \"cash\" on the books of the banking system. So, the U.S. economy is not out of the shadow of inflation...yet....... But, this fall, the Federal Reserve has been lowering its policy rate of interest, even though it is still exercising its policy of quantitative tightening. The Fed lowered its policy rate of interest by 50 basis points in the middle of September 2024 and then lowered it by 25 basis points early in November. However, longer-term bond rates have risen since the middle of September...they have not declined.   10-year U.S. Treasury securities (Federal Reserve) The reason? Well, if we divide up the market yield on the 10-year U.S. Treasury securities into an expected real rate of interest and an expected rate of inflation, we find that most of the change in the nominal market yield on the 10-year U.S. Treasury securities over this period of time has come from the rising expected rate of inflation. In the earlier part of September 2024, the expected rate of inflation investors built into the yield on the 10-year U.S. Treasury note was right around 2.00 percent. By the end of September, this expected rate of inflation rose to around 2.20 percent. By the end of October 2024, the expected rate of inflation rose to be around 2.40 percent, and it has remained around this level up to the current date. That is, investors have come to expect that the compound rate of inflation from now through to October 2034 has increased from 2.00 percent to 2.40 percent...a not insignificant rise. In other words, even though the Federal Reserve has been reducing its policy rate of interest and even though many investors expect that the Fed will continue to reduce its policy rate of interest through 2025, the market has built into its yields that over the full ten-year period, interest rates will rise and rise and rise. And, the increases are expected to be the result of the future rising rates of inflation in the United States. In other words, the investment community is forecasting that inflation is going to go up...and not down... over the longer run. In other words, the Federal Reserve will not accomplish its goals of returning the U.S. inflation rate to 2.00 percent and keeping it there. Hence, we have a plethora of articles about what inflation has done over the past four years and why we should not count on inflation just dropping and going away as an issue soon. It seems as if investors are moving more and more to this position. In fact, investors could become leery of any Federal Reserve efforts to continue to reduce its policy rate of interest. First of all, the Federal Reserve still must deal with all the reserves that remain in the banking system that were a result of the \"helicopter money\" dumped into the banking system to combat the COVID-19 pandemic crisis. Second, the buildup of fiscal spending begun in the Biden administration is expected to continue into the Trump administration. The Federal debt is projected to grow and grow and grow. And, then there are the expected efforts of the Trump administration to raise tariffs, an effort that most economists believe will only cause U.S. inflation to rise more.  So, investors seem to be saying that inflation...in the United States...is not going to go away.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484903597"}