A Recession Won’t Cure Inflation Anytime Soon

A Recession Won’t Cure Inflation Anytime Soon

It sure feels as though we are in a recession:

  • Weak reports from retailers such as Amazon (AMZN) and Target (TGT, twice in Target’s case).
  • Soft retail numbers HERE.
  • Low consumer confidence HERE.
  • Atlanta Fed’s new GDPNow estimate (as of June 15th), is zero percent Real GDP for Q2.
  • Depleted personal savings (chart below).
  • Even Johnny Come Latelys like Guggenheim’s investment chief Scott Minerd are coming around to the idea that the U.S. may be in a recession while we are in the midst of tightening monetary policy (see YouTube video interview with Mr. Minerd below).

However, while the capital markets believe a recession will cure inflation, it will not in the near-term. The trillions of dollars of excess liquidity added to the economy in 2020 and 2021 will take years to work through the system before we see a CPI that resembles 2%.

Personal Savings Rate: St. Louis Fed: https://fred.stlouisfed.org/graph/?g=QiaR