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How Will Investors Know If Inflation Is Transitory Or Permanent
The Fed has indicated that it does not see its expected inflation surge in the coming months as pointing to longer-term pressures. Many investors are sceptical, but do not have a framework from which to push back against the Fed’s optimism that it can manage a "gentle inflation overshoot." Here we argue that looking at trimmed mean inflation is a straightforward way of assessing whether an inflation surge is broad-based or narrow. So far, we find small indications that these broad-based inflation indicators are rising, but nothing conclusive. This assessment could change in the coming months. We do not expect ... (full story)