THAT ’70S SHOW: Inflation is Coming… And Here’s Why.

It’s important to note that it’s only a matter of time before the end of the global PPI deflation cycle feeds into US prices and boosts the CPI. While the media has all but ignored this South Korean PPI chart, it’s a rather significant development. Goods deflation in the US is coming to an end.

While the dollar rally will continue creating a drag on US inflation, the dollar wasn’t the main culprit of disinflationary pressures over the past couple of years. Inflation fell sharply around the world – even in countries whose currencies didn’t strengthen. Many point to deflation being “imported” from Asia, particularly China. And now China’s (and South Korea’s) wholesale deflation, which has been in place since 2012, is finally over.

That’s why US inflation expectations continue to move higher.

The Fed has tried unsuccessfully for a decade to induce inflation. Now that the beast is finally escaping, that very same Fed thinks they can keep it tame enough to give us just the “right amount” of inflation.