Why the war on inflation is over even though the experts dont get it

The war is over: not the war in Ukraine or Gaza – I mean the war on inflation. Shoppers, understandably, are still freaking out in the grocery aisles, most recently over egg prices.Meanwhile, economists, politicos and pundits continue to sweat allegedly “sticky” categories for goods and services and rising wages – especially after January’s Consumer Price Index accelerated. They are all fighting the last war.

How about you and your stock portfolio?Yes, inflation has hammered households since 2021 and it has been horrific.The CPI ended January 23.4% above December 2019 – and that understates many shoppers’ experience – including yours, probably.

It’s also true that the end of a military war doesn’t mean the destruction is somehow reversed.The latter, unfortunately, is also the case with inflation. Prices and inflation are different.Inflation is the speed of rising prices — now 3% versus a year ago based on CPI.

Prices overall don’t fall.Select categories may, but broadly falling prices – aka deflation – well, developed nations don’t do that.

Why?Real, deep deflation means depression – an even deadlier war.Reversing CPI’s post-pandemic rise means approximating 1929 – 1933’s deflation or the early 1920s’ post-World War I downturn.

Is that really what you want? Didn’t think so.Winning the inflation war was never about lowering prices, but rather slowing their advance.Last November, I detailed the reasons the Federal Reserve wants 2% ongoing annual inflation.

Since peaking at 9.1% in June 2022, CPI irregularly cooled to January’s 3.0%.Despite all the yakking about acceleration, that’s 0.1% above December.

A statistical blip.These measures aren’t that exact anyway.Meanwhile, December’s “personal consumption expenditures price index,” the broader gauge the Fed actually targets, was 2.6% versus a year ago.

Pundits shrieked that it was “stuck” above the 2% target, hyping every worrisome wiggle.But no ...