Is the second wave of US inflation on the way?

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In recent weeks, there has been more talk about a potential second wave of inflation coming in the United States as was the case in the 1970s.

This has been driven by the recent inflation data which has shown some stickiness.

CPI inflation increased to 2.7% year-over-year in November, the highest since July and in line with expectations of 2.7%.

Core CPI Inflation (excl. energy and food) rose 3.3% year-over-year in November also in line with estimates.

As a result, the core CPI year-over-year rate has been above 3% for the last 43 months.

Meanwhile, PPI inflation jumped to 3.0% in November, above expectations of 2.6%. Whereas Core PPI rose to 3.4%, above expectations of 3.2%.

Another argument adding to the worries has been the Fed cutting interest rates. With December 18 cut by 0.25% the Fed’s rate will be down by 1.00% to 4.50%.

All things considered, the article will try to answer the following questions:

Is the US economy awaiting a second wave of inflation as in the 1970-1980s?

Is this a completely false and misleading narrative and the economy is heading for deflation (falling prices)?

Or maybe we will see a prolonged period of an elevated 3-4% inflation rate?

Lastly, what that could all mean for the stock market?

CURRENT ASSESSMENT OF DIFFERENT INFLATION METRICS

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