Peter Smith
Recent analysis shows the US Inflation Index rising as New York Fed inflation expectations reach their highest level in three years. This development is raising fresh concerns that the Federal Reserve may need to keep interest rates elevated longer than markets expected.
Chart Analysis: Inflation Trend Turns Higher
In a recent post, That Martini Guy warned that the US Inflation Index is rising again. The Truflation US Inflation Index chart confirms that price pressures are climbing after months of cooling. The index currently sits at 2.26%, down slightly by 0.04% from the previous reading. After bottoming out between March and April with a year-to-date low of 1.22%, inflation has steadily risen since July, though it remains below its 3.04% yearly high. Interestingly, the Bureau of Labor Statistics still reports a higher CPI rate of 2.90%, showing a notable gap between official measures and real-time estimates. The chart makes one thing clear: while inflation has backed off from earlier peaks, it's far from contained.
What's Driving Inflation Higher?
Several factors are pushing prices up again. Energy costs rebounded over the summer as oil and fuel prices climbed. Core components like shelter, services, and wages remain stubbornly elevated. Meanwhile, geopolitical uncertainty continues disrupting global supply chains, keeping costs firm across the board. These pressures explain why both inflation expectations and real-time indicators are trending upward together.
For the Federal Reserve, the path forward looks increasingly restrictive. Hopes for near-term rate cuts are fading fast. With NY Fed expectations at a three-year high, there's growing risk that inflation psychology is shifting, making price increases harder to reverse. The central bank will likely maintain its "higher for longer" stance, holding rates steady until inflation trends decisively lower.
Peter Smith
