Classic Carr:
"I’ve said it a thousand times, but Fed officials who reckon they can’t see headline inflation ‘seeping’ into core inflation need to open their eyes and maybe learn how to read and count. Headline inflation rose 0.4% which was about expected and sure, fuel was about half of it. Annually headline CPI is 3.2% higher (2½yr high). The thing is core inflation is rising sharply as well. You may not think that looking at the core annual rate of 1.3%, but so far this year core inflation has increased at an average monthly rate just below 0.2%, giving an annualised pace of growth of 2.1% YTD. That’s a serious acceleration from flat late last year.
Now Bernanke’s view is that inflation is transitory and there is no shortage of people regurgitating that view - but track record is important here and given that he has been wrong so far on growth and inflation I don’t think he’s got a lot of credibility. Jim Rogers once famously said that Bernanke doesn’t understand economics or finance. His words.
One key reason why I think that inflation hasn’t peaked and is certainly not transitory, is that global growth is booming. If the trade figures aren’t convincing enough then last night’s European GDP figures should settle the matter. Growth in the world’s largest economy rose by 0.8% in Q1, a sharp acceleration from 0.3% in Q4, and that’s with the peripherals dragging the chain. Growth in Germany was exceptionally strong at 1.5%q/q and France wasn’t too far behind with growth of 1%. Now consider the stance of economic policy around the world. What exactly is going to stop this growth? There are plenty of black swans out there as dovesv are very quick to point out following any decent data. But these are low probability events. As has been the case for years now, underlying economic momentum has been very strong and repeatedly refusing to believe this or talk it down hasn’t changed things."
