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[ATTACH=full]145212[/ATTACH]

What it means

At a time when many commentators are grappling to find an analogy to explain the current inflation episode, we believe it’s worth considering what happened in the United States in 1947.

At the time, the US was beginning to recover from global disruption caused by WWII. Global productive capacity, which had previously been focused on (or destroyed by) the war, struggled to supply post-war consumer demand as soldiers returned home from Europe and the Pacific. Additionally, wartime price controls were removed. Two years later, the US CPI was +14.4%. By 1949, the change in CPI fell to a -1.0%.

Was this decrease driven by a large rate hike cycle enacted by a hawkish Federal Reserve?

No. In fact, the Fed’s 12-month rate increased only slightly from 0.75% in July 1947 to 1.25% in Aug 1948. The real driver was the natural expansion and recovery of US / global productive capacity after a traumatic disruption to normal operations.

Looking back, the 1947 inflation was clearly transitory (despite the two-year lag in CPI data). It begs the question: will we come to the same conclusion with the current inflation episode?

[URL unfurl="true"]https://www.sharecafe.com.au/2022/08/10/12-charts-were-thinking-about-right-now/[/URL]

<blockquote data-quote="Dona Ferentes" data-source="post: 1188045" data-attributes="member: 66457">[ATTACH=full]145212[/ATTACH]What it meansAt a time when many commentators are grappling to find an analogy to explain the current inflation episode, we believe it’s worth considering what happened in the United States in 1947.At the time, the US was beginning to recover from global disruption caused by WWII. Global productive capacity, which had previously been focused on (or destroyed by) the war, struggled to supply post-war consumer demand as soldiers returned home from Europe and the Pacific. Additionally, wartime price controls were removed. Two years later, the US CPI was +14.4%. By 1949, the change in CPI fell to a -1.0%.Was this decrease driven by a large rate hike cycle enacted by a hawkish Federal Reserve?No. In fact, the Fed’s 12-month rate increased only slightly from 0.75% in July 1947 to 1.25% in Aug 1948. The real driver was the natural expansion and recovery of US / global productive capacity after a traumatic disruption to normal operations.Looking back, the 1947 inflation was clearly transitory (despite the two-year lag in CPI data). It begs the question: will we come to the same conclusion with the current inflation episode?[URL unfurl=&quot;true&quot;]https://www.sharecafe.com.au/2022/08/10/12-charts-were-thinking-about-right-now/[/URL]</blockquote>

[QUOTE="Dona Ferentes, post: 1188045, member: 66457"] [ATTACH type="full"]145212[/ATTACH] [B]What it means[/B] At a time when many commentators are grappling to find an analogy to explain the current inflation episode, we believe it’s worth considering what happened in the United States in 1947. At the time, the US was beginning to recover from global disruption caused by WWII. Global productive capacity, which had previously been focused on (or destroyed by) the war, struggled to supply post-war consumer demand as soldiers returned home from Europe and the Pacific. Additionally, wartime price controls were removed. Two years later, the US CPI was +14.4%. By 1949, the change in CPI fell to a -1.0%. Was this decrease driven by a large rate hike cycle enacted by a hawkish Federal Reserve? No. In fact, the Fed’s 12-month rate increased only slightly from 0.75% in July 1947 to 1.25% in Aug 1948. The real driver was the natural expansion and recovery of US / global productive capacity after a traumatic disruption to normal operations. Looking back, the 1947 inflation was clearly transitory (despite the two-year lag in CPI data). It begs the question: will we come to the same conclusion with the current inflation episode? [URL unfurl="true"]https://www.sharecafe.com.au/2022/08/10/12-charts-were-thinking-about-right-now/[/URL] [/QUOTE]

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