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Inflation Rate In The US Is Expected To Keep Climbing

inflation rates
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EDITOR'S NOTE: Confound Interest dives deep in the weeds into a Wu-Xia “Shadow Rate” that calculates interest rates and can “summarize the macroeconomic effects of unconventional monetary policy.” This Shadow Rate in the US is now -1.7021%. This negative shadow rate is why the inflation rate is rising the prices are rising on nearly everything we buy in this country at the end of 2021. In simple terms, Confound Interest explains, “In other words, the US has abnormally high inflation and is expected to grow and NOT be transitory.” In even simpler terms, “the US is hyperstimulated. And inflation isn’t going away anytime soon.”

Wu-Xia employs an approximation that makes a nonlinear term structure model extremely tractable for analysis of an economy operating near the zero lower bound for interest rates. It can be used to summarize the macroeconomic effects of unconventional monetary policy (ZIRP + QE). The Shadow Rate is now -1.7021%.

Photo: Confounded Interest

And you wonder why we have inflation and house prices going into orbit?

With inflation also going into orbit, we see that breakeven 10 year inflation rate rising above the 5Y5Y (nominal forward 5 years minus US inflation-linked bonds forward 5 years). In other words, the US has abnormally high inflation and is expected to grow and NOT be transitory.

inflation

Photo: Confounded Interest

The Shadow knows … that the US is hyperstimulated. And inflation isn’t going away anytime soon.

Originally posted on Confounded Interest.

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