The Keystone Speculator's Inflation-Deflation Indicator; UNITED STATES ENTERS THE INFLATION RANGE WITH THE 1/28/26 FED RATE DECISION ON TAP; Trumpflation

Keystone's inflation-deflation indicator pops up into the INFLATION range just before the Federal Reserve meets on Tuesday and Wednesday with the rate decision and Powell presser on tap 1/28/26 in the afternoon East Coast time. It adds a layer of complexity for the Federal Reserve since rising inflation, Trumpflation, will take off faster and run far higher and hotter if flames are fueled with rate cuts.

The Fed is taking a neutral stance on its dual mandate of price stability (controlling rates) and keeping unemployment low. The Fed had their thumb on the scale of jobs providing rate cuts to help boost the economy but is now not wanting to weigh one mandate more than the other. With the latest 3.18 number on the indicator, caused in a large part by rising commodities, mainly base metals, the Fed will have to start placing more emphasize on taming rising inflation rather than the jobs picture. You will see that in Powell's comments on hump day.

The likely sad path ahead, however, may be a 1970's stagflation redux where folks are out of work and inflation is running higher. Stagflation kills families of modest means. However, there was a lot of great music out of 70's. Like Elton and Crocodile Rock. At high school dances in the 1970's across America, teens would congregate at the high school gym on a Friday night for a Halloween Dance or some other special event, and groove to the latest rock tunes. Guys would muster up courage to walk across the gym floor and ask a girl to dance but it would mostly be slow dances because they only knew how to shuffle back and forth. Those Friday nights, when Suzie wore her dresses tight. Ow!

Anyhoo, the Fed will stand pat on Wednesday not providing a rate cut so King Crybaby Trump will throw a tantrum and berate and denigrate Powell and the Fed. Fun times. Comically, Powell is protecting Trump from himself. It's funny. Trumpski is under the delusion that inflation is falling. It is choppy in month to month data but overall, as clearly shown above, inflation is on the move higher for the last couple years. It bottomed in the neutral range as 2024 started and inflation has increased ever since. The frog is being boiled slowly.

Even Trump is in between a rock and a hard space. If rate cuts occur going forward, it will fuel the breakaway inflation. Trumpflation would be a permanent word in the lexicon. If rate cuts do not occur, the jobs picture will likely continue to deteriorate. Now you are getting into recession territory since people not working buy less stuff, consumer sales will drop now that the holidays are over and after everyone shot their wad, and employers have to sh*t-can more workers (a deflationary spiral begins). Choose your poison. Poison in the Well.

The week ahead will have lots of fireworks around the Fed. The baby presidential reality television show continues daily with the new Fed chair side plot appearing in recent daily episodes. Keystone summarized the new Fed chairman drama a couple weeks ago; here is the link. The top job at the Fed becomes a lot harder now since whoever King Trump picks as the new chairman must agree to lick Donnie's wingtips and his orange butt each day, and lower rates at each meeting. This will be a catastrophic mistake for the economy and markets if the chart above keeps jumping higher.

After the 1/27/26 and 1/28/26 two-day meeting, the next FOMC meeting is 3/17/26 and 3/18/26, and then 4/28/26 and 4/29/26, and then 6/16/26 and 6/17/26. Powell is done mid-May in less than 4 months.

Thus, mathematicians say thus a lot, that is why days after hearing about the fun party, the host told Keystone his invitation probably got lost in the mail, Powell only has three more meetings remaining in his long 8-year reign including Wednesday. No one is likely looking forward to exiting stage right more than him, despite the talk of staying on. That is stupid talk. Powell will be ready to retire and get out of the spotlight and the Federal Reserve has to stand on its own with whatever members it has; he will likely go fishing come May.

So hump day is likely no cut, and the March meeting will be up in the air but probably leaning towards no cut, and then the late April meeting will be Powell's swan song and farewell meeting. At that point, you just want to leave it all to the new guy, or gal, that will have their first meeting in June less than 5 months away. The short time remaining for Powell makes all of Trump's rhetoric over the last year sound even more babylike and childish but, that's Our Donnie. He was born a little rich kid with a silver spoon in his mouth so his behavior through life, and now, is no surprise; self-centered narcissism.

It is doubtful that Donnie will upstage the Fed and announce the new chairman selection before Wednesday but you never know. If it makes for good television for the daily presidential reality show, he may do it, but probably not. How would you like to be the fool that takes the chairman job, so everyone knows that you agreed to lick Trump's butt, and he announces it now so you have to deal with the decisions coming, and any Fed statement here forward, and basically start the job immediately, but you will not take office until May. "Good luck wit dat," as they say in the Bronx. It will be interesting to see who wants to be Donnie's little b*tch.

There may be conflict between the new guy selected and Powell as the confirmation process for the new chairman would begin. Trumpski is running out of time and needs to get the ball moving. He may wait for the Fed decision on Wednesday and then announce his pick afterwards. Trump has botched the process over the last year, first promising a pick last September, and then lying every other week saying the pick is two weeks away.

Donnie is "Two-Week" Trump. It is funny that we have "Two-Week" Trump in the Whitehouse and "Too-Late" Powell at the Fed. This must be how the crony capitalism system finally collapses. Donnie will likely have no choice but to pick kiss-*ss Hassett for the chairman job.

The chart above is a bowl of spaghetti so it may be helpful to untangle it a bit. The prior inflation/deflation chart is from last April if you want to review that point in time about a year ago; here is the link.

Inflation is choppy sideways for 3 years in neutral territory with the Federal Reserve not making any progress lower to their 2% goal (do not confuse Keystone's non-dimensional indicator above with the actual inflation percentages). You can call it a victory in that inflation has been held in check, albeit at higher everyday prices for food, rent, insurance, utilities, etc.., but at the same time a failure because it is not moving lower. The Fed needs to pull the indicator down to that 2.5-ish area to make headway with the final push lower to their 2% inflation target. Maybe it is a bridge too far?

Inflation is back in vogue, like Madonna, strike a pose. Inflation is rearing its ugly head again with Keystone's indicator sneaking higher above 3.1.

The chart above mainly reflects goods inflation rather than services inflation. For decades this did not matter since both moved in unison. In recent years, however, due to obscene central banker money printing that has made the wealthy rich beyond their wildest dreams, and the disruptions of supply lines due to the pandemic, the goods and services inflations have not been in sync.

Services inflation, that was prevalent during and after the pandemic, rolled over and came down to join goods inflation but after a few months, the game is changing again. The demand for precious metals such as gold and silver, and base metals such as silver and copper, are through the roof. This behavior is sending metal prices to the moon and these higher costs will ripple down through the economy. The AI garbage is the culprit causing inflation in utility costs and now common people will pay the cost of higher inflation so the wealthy can become richer. Such is crony capitalism filth.

The rise in metals are a big deal since all electronics will be more expensive. Ditto any gifts you buy for your honey. Silver is the hot commodity nowadays since it has its claws in both the precious and base camps; a twofer so it is the most popular girl at the dance. 

The oil, coal and natural gas industries are the energy backbone of the United States. President Biden's war on America's energy complex in favor of the glorified gold cart (EV) economy, along with the out of control Congressional spending (fiscal stimulus), and the Fed's money-printing (monetary stimulus), and the Ukraine War, and the ongoing supply disruptions from the pandemic aftermath, created the runaway inflation in 2022.

Now the impacts of the Trump tariffs will finally ripple through to a greater extent and resume the trek of higher prices. Everyone hopes this is not the case because people cannot afford to live now. It would be nice to have a president who cares, but Trumpski is more interested in foreign affairs and licking Putin's boots. Donnie is hob-nobbing in The Alps the last few days at Davos drinking hot toddies and telling the millionaires how they should live. Americans can eat cake.

The 10-year Treasury note 'price' is used for the denominator (bottom number) of The Keystone Speculator Inflation-Deflation Indicator. The 10-year Treasury price is 98.20 with a yield at 4.23% on 1/24/26 (same yield as 9 months ago).

Commodities are in the numerator (top number). The CRB Commodity Index is at 312.24.

CRB/10-Year Price = 312.24/98.20 = 3.18

Above 4.20 = Hyperinflation

Between 3.1 and 4.2 = Inflation

Between 2.5 and 3.1 = Neutral; Inflationists and Deflationists Battle

Between 2.1 and 2.5 = Disinflation

Below 2.1 = Deflation

The Fed is targeting a 2% inflation rate (not to be confused with the indicator number) and since the indicator above is moving choppy sideways for the last 2 years, inflation can be assumed to be moving sideways above the Fed's 2% inflation target. Keystone's indicator is in a neutral sideways posture but this is viewed as too high inflation from the Fed's perspective, and the public's eye, when they go to the grocery store. It will only become worse if the chart continues higher.

Granted, the calculation above is focused more on goods inflation rather than services inflation. For many decades, you could track commodities, with the CRB, or GTX, and the goods inflation and deflation dictated the overall economy's direction. As the US politicians and corporations screwed common America over the last five decades, sending jobs overseas and destroying the middle class so stock prices could move higher on the foreign slave labor, the goods production went to foreign nations while the US focused more on services as the major part of the economy.

Bring up the $CRB and $GTX charts to see the breakouts that represent inflation rising going forward.

The debate between inflationists and deflationists over the last few years has been the discussion of goods versus services inflation. The pundits looking for inflation said goods would inflate and catch-up to the rising services sector while the talking heads preaching deflation said the services inflation would drop to join the goods disinflation and deflation as the economy slumps. All bets were off and both sides ended up being correct as the COVID-19 pandemic hit knocking the world on its arse.

The deflationists were correct in 2019 and 2020. Services inflation drops to become more compatible with the goods deflation. Of course, the China Virus pandemic wiped out the airlines, hotels, travel, restaurants and hospitality and leisure industries. Services are knee-capped falling to the ground joining the goods deflation. Men turned into bush people letting their hair grow wildly outward as they avoided the barber for fear of catching covid.

Then the central banker cavalry arrives March 2020 promising to print money forever. Greenspan, Bernanke and Yellen (former Fed chairs) were already in the basement of the Eccles Building running the printing presses like mad. Helicopter Ben loaded-up his chopper with freshly printed Benjamin's dropping the money from the sky into the investment banker's hands on Wall Street. The crony capitalism filth rains down from above.

President Biden, along with Congress, provided way too much stimulus during the pandemic creating a lazy workforce that would rather sit home than work. The staffing shortages were a headache for employers that wanted to get back to normal during 2022 to 2024. Wages rise sending inflation higher. These behaviors, and the obscene amounts of Congressional (fiscal) and Federal Reserve (monetary) stimulus, send inflation to the moon.

When the Fed and Congress tag-teamed in March and April 2020 with trillions in stimulus, billions went into the US stock market pumping it to record highs. A few hundred thousand workers left the workforce either retiring or caring for loved ones after the pandemic, creating a massive labor shortage as the pent-up demand hit in 2021 and 2022.

Rising wages create inflation. The lack of inflation and ongoing persistent deflation for many years was due to the stagnant wage growth. Inflation cannot exist without wage inflation which had not occurred for many years until 2021 and 2022. In 2025, wages were moderating to keep inflation at bay, and maintaining a sideways posture, but inflation will increase if employers have to start raising wages to keep or attract workers in 2026.

The inflation in recent years is mainly due to energy, food, insurance, and rent/utility costs and a lot of this is due to the AI hype, and perhaps AI follies, as time plays out. People notice higher gasoline and food prices more than other price changes and a recent feather in Trump's cap is the lower oil prices that create lower gasoline prices, but that may change with buoyancy appearing in oil prices again.

The wealthy class, made super rich by the Fed's money-printing over the last couple decades, continue to spend money which staves-off an overall recession in America, for now. There were signs that the wealthy were beginning to cut back on their spending but the holidays came and everyone spent more money they do not have. Why not? The government and Fed do the same; join the party. YOLO; you only live once, as Andy Huggins jokes. Hysterical comedian.

Inflation in 2022 ran higher to try and match the 2011 highs. Back then, traders were convinced that rates would continue higher but instead the peak was in. Time will tell if the inflation peak in May/June 2022 will hold; so far it has 3-1/2 years later. The poke higher to begin 2025 petered out with the indicator falling back into neutral territory but it has started higher again with a vengeance under Trump.

Remember after Trump won the November 2024 election, inflation continued higher into January 2025, when he was sworn into office, but it then retreated into the springtime. Donnie was quick to seize credit for bringing down inflation solely due to him winning the election and his presence in the Whitehouse. How about now, orange head? Trump does not have that leg to stand on anymore since the Trumpflation is now back up to the highs seen as he was elected and took office a year ago.

A breakout above the prior 2025 highs will open the door to test the May and June 2022 peaks in inflation. Americans will be screaming for relief if this outcome is on the table and the country will be in a lot of trouble (with stagflation) if the indicator takes out the May/June 2022 highs since the inflation highs from 2011 will be the next upside target.

The people propping up the economy right now are the upper class and wealthy because the Fed's easy money made them rich beyond their wildest expectations driving stock prices to the moon (at the expense of the rest of society). The metals are currently sending goods inflation higher sending overall inflation higher. 

The news is not good for Federal Reserve Chairman Powell that begins looking for the fishing poles and lures in the basement this weekend. The bad news is that the Fed is making zero progress for 3-1/2 years at lowering inflation to their 2% goal. Oh no, well, if that is bad news is there any good news? Nope, last year, the good news was that inflation was not trending higher so there was hope at further reductions in prices. Not anymore.

Inflation is moving higher as the chart above shows as King Donnie calls for more rate cuts that will only fuel higher inflation. The King Donnie reality television show will feature a few episodes with Pope Powell this week. Be sure to tune in and waste your lives listening to the crony capitalism dribble.

The wealthy class loves rate cuts because the easy money flows into the stock market pumping prices higher making the rich richer. One-half of Americans do not own a single share of stock. 30 million Americans used the crony capitalism system to screw the other 300 million over the last five decades destroying the middle class. The 30 million keep asking why is everyone so glum?

The stock market will not be happy that rate cuts are on hold, and that at the same time, higher inflation and lower consumer spending may hurt earnings. Do you smell that? No, it is not Keystone, he took a shower this morning. It is the slight whiff of stagflation in the air.