Inflation Watch: What if the cyclical prices are not truly tamed? Lessons from Canada and Sweden
If you know me, you know I have a thing for charts, especially those showing momentum in the macro cycle. Forget nominal levels; it’s the rate of change that really drives asset markets.
This analysis is chock-full of rate of change charts, just to remind you that we’ve only managed to nudge inflation back to just above target levels—right as the cycle’s rate of change is shifting towards re-acceleration in many places. Sweden and Canada, with their cyclical economies, are prime examples.
And with “dovish surprises” becoming the norm in global inflation numbers, disinflation enthusiasts won’t have much to cheer about in the second half of 2024 and into 2025 as inflation surprises mean revert.
Let’s have a look at the details…
Chart 1: Inflation surprises across the globe
The debate on whether this is a Burns or a Volcker-like scenario rages on, but re-inflationary forward-looking indicators are increasingly coming to light. This is particularly evident in countries that have already cut interest rates.
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