US CPI Inflation Falls to 4%- Flashes Deflation Warning to Commodity Bulls Towards 2008 End

Economics / Inflation Mar 14, 2008 - 11:00 AM GMT

US CPI Inflation came in flat for February, confounding consensus forecasts that called for a rise of 0.2%. Annualised CPI falls to 4% from 4.3% and is inline with my overall expectations as highlighted in the extensive article of 2nd March 08 - Credit Crisis Morphs Into Stagflation- Protect Your Wealth! Which concluded that deflationary forces would take hold towards the end of 2008 as illustrated by the graph below -

The implications are that the commodities bull markets such as Gold continues to experience will peak sometime before the deflationary trend becomes apparent, which will probable coincide with a brief rise in interest rates after the US election. But for now the primary objective of the US Fed remains to ensure an economically accommodative as possible environment for the incumbent party in the lead up to the US election, therefore the expectation is strong of a further cut of 0.5% and possibly event 0.75% in US interest rates at next Tuesdays FOMC meeting.

By Nadeem Walayat

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 120 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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Comments

Mark Turner 14 Mar 08, 11:30	Shadow CPI Statistics I would steer the author towards John Williams at ShadowStats.com for a different opinion on the true US CPI number and remind him that analysis based on totally 'Offical data' will invariably result in incorrect conclusions.
Nadeem_Walayat 14 Mar 08, 14:56	Shadow Statistics are Wrong The shadow statistics are wrong. According to the site the US never came out of recession. If that was the case then the US could not have had a housing boom.
Paul 20 Mar 08, 23:51	Inflation, housing You can have a housing boom anytime when "no money down" is the requirement. I live in the US and those official inflation stats are so bogus - everyone here knows it.
Paul 20 Mar 08, 23:55	US inflation What I meant to say in my prior post is that the official reported US inflation is understated.
Alouisis 01 May 08, 18:14	Shadow Statistics Of course housing prices can blast off with the stupid financing that was being offered. My theory is there is a group of very significant investors who weild enough money to make markets. These investors went from the American Stock market during the Clinton years to the electricity markets on to real estate lending and finally to commodities. There is no underlying reason for any of these bubbles to have occured other than the market makers. Personal observation (and I have a national view) corroborate the information that appears in Shadow Stats. Our government is clearly misrepresenting the facts. It is chillingly reminiscent of Atlas Shrugged.

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