Yesterday we saw the switch from the neutral inflation-deflation zone into disinflation. This is a big deal since the inflation buoyancy caused by QE2 and Mother Nature problems around the globe the last year has now ended. After yesterday's drastic drop in yields (price up), let's take another look.
Keystone's Inflation Deflation Indicator = CRB/10-Yr Price = 316.12/107.641 = 2.94
Over 4 = Inflation
From 3 to 4 = Neutral; inflation and deflation battle for control
From 2.9 to 3.0 = Disinflation
Under 2.9 = Deflation
Thus, yesterday, we had just slipped ever-so-slightly into disinflation with a 2.98 number, and today, we are down further to 2.94. The drop below 2.9 announces the arrival of deflation. Chairman Bernanke will probably not announce QE3 until we fall below 2.9 towards 2.5 and deflation is firmly in place. This indicator is interesting since the general consensus maintains that we are in inflation. The indicator peaked at 3.6 a couple months ago, however, never threatening the 4 level, so inflation was truly transitory this year as Chairman Bernanke continually stated.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.