When Will Inflation Abate, and What Will Make That Happen?

Real Vision: Finance & Investing

Real Vision

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🗓️ 13 April 2022

⏱️ 33 minutes

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Summary

The Consumer Price Index increased 8.5% in March compared to a year earlier, another new 40-year-high following a 7.9% annual gain in February. Energy and agriculture markets remain the critical areas of focus, each of them adversely impacted by Russia’s invasion of Ukraine. U.S. equity indexes surged on a slower-than-expected 0.3% month-over-month CPI increase, and many economists see this as a potential peak in this inflationary period. The Federal Reserve has left the door open for a 50 basis point increase to its federal funds rate target, and “quantitative tightening” is set to commence in May. But there’s little to suggest inflation will recede toward the central bank’s 2% target anytime soon. Tony Greer, founder of TG Macro, joins Warren Pies, founder of 3Fourteen Research, for today’s Real Vision Daily Briefing to discuss commodities, inflation, central bank policy, and financial markets. Want to submit questions? Drop them right here on the Exchange: https://rvtv.io/3JtPfzO Learn more about your ad choices. Visit podcastchoices.com/adchoices

Transcript

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0:00.0	Welcome to the Real Vision Daily Briefing. It's Tuesday, April 12, 2022. I'm Warren Pies,
0:12.3	founder and strategist at 314 Research. Today, I am joined by Tony Greer, founder of TG Macro,
0:20.0	good to be back to Tony. Big day. Have you been? I've been great, Warren. How you been, man?
0:25.5	Good. Today, markets ultimately down, bond market gets a little bit, oil back above $100 a barrel,
0:35.7	but obviously the big story of the day is CPI and inflation. Everybody wondering, with 8.5%
0:43.2	increase year over year on the CPI, if this is the peak, where we go from here so much rides on
0:48.9	how this inflation statistic comes, it turns out through the year. What's your initial take just
0:55.1	on today's CPI report? Well, you look for it as a trader to be a sort of the beginning of a
1:02.8	sell-to-fact event. Markets have been rallying in inflation mode heading into this headline number,
1:10.8	so you kind of would have expected an unwind of things today, but we didn't really get that.
1:16.4	What we got was 8.5% year over year CPI, but really important underneath the hood is the food
1:24.3	index, which was up by 8.8% Warren, like the largest 12-month increase since May 1981.
1:32.4	We've reached historic levels here. I heard there was a number like 5 or 6 Wall Street banks
1:38.1	called the peak of this inflation period right here. I'm sure you have your views in my particular
1:45.8	view on this is I'm wondering where the commodities are going to come from. So that's the view of
1:51.1	the Wall Street bank analysts that since we are on par with the highs that we've seen in the past,
1:57.3	that this is probably where this Peter's out, and I have no idea where they're coming up with that
2:02.7	type of scenario. What do you think? Yeah, I mean, just you're dead on. I was looking at the food
2:09.7	component, the energy component, the commodity drivers of this number. We have a chart, we prepared
2:15.4	and updated the data from 314. I think it's a good one to take a look at and set the table for
2:19.6	this discussion. It shows the big drivers of inflation at this print. So we're up 8.5% year over
2:26.8	year on the CPI. Where did that come from? Well, you basically have to start with energy. We break
	...

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