Drop in GDP trajectory, rise in inflation expectations, and expected long rates up.
Back in the more innocent days of 2010, we had Sarah Palin – “Drill, baby, drill” (more innocent because folk were just circulating doctored photos of President Obama, instead of threatening to kill elected officials). Now, we have a new chorus of people asserting that allowing more permitting would relieve gasoline price pressures. Well, from the Dallas Fed (courtesy of Bruce Hall), some text in plain English.
Five year inflation breakeven shrinks, ten year – three month spread dives, TIPS and expected real rates rise above zero. The S&P500 and Bitcoin falls even as VIX remains at sub-Trump levels.
Some key interest differentials, through March:
Official, chained, sticky price, 16% trimmed, and (for March) PCE deflator.
Dramatic plunge in headline CPI m/m inflation, but both headline and core surprise on upside.
Inflation exceeds average hourly earnings in the aggregate (private sector) and for Leisure and Hospitality Services (production and nonsupervisory). But they are still ahead of 2020M02 levels.
We now have Q1 GDP for the US and Euro Area. While US inflation as measured by CPI/HICP is higher than Euro Area (US core accelerating relative to EA by 0.7 ppts since the pandemic), US GDP growth has also been higher.