Posted originally on the CTH on December 14, 2022 | sundance

As we have often discussed on these pages, inflation would ultimately moderate and plateau not because prices were dropping but rather because of the calendar cycle.

As the economy cycles through a year of large price increases, the current inflation rate cycles through to the period when prices first increased.  This calendar cycle means continued price increases are lower as a percentage and thus the inflation rate appears to modify despite prices continuing to rise. [BLS Report]

This scenario, prices remaining high and continuing to climb – yet lower as a percentage, now provides the justification for the federal reserve to state inflation is moderating.

(Via NBC) – Amid signs that price growth in the U.S. economy is rapidly cooling, the Federal Reserve announced Wednesday it was slowing the pace of its rate-hiking program designed to tackle inflation — but that more hikes were still on the table.

The Federal Open Market Committee said it was increasing its key federal funds rate by 0.5%, after announcing four-straight 0.75% hikes at its most recent meetings. In its Wednesday statement, the Fed said it continues to target an inflation rate of 2% over the long term and would continue to increase the federal funds rate to do so.

“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the committee said.

But bringing down inflation is likely to come at the cost of higher unemployment in the short term: The Fed said it now projects the 2023 unemployment rate to average 4.6%, equating to hundreds of thousands of more jobless workers compared with the current rate of 3.7%.

The Labor Department on Tuesday reported that annual inflation clocked in at 7.1% in November — the lowest reading in more than a year. While it is still high compared to the 2% level at which the Federal Reserve typically seeks to hold down inflation, the most recent number signals that the galloping price growth earlier this year is fading. (read more)

Prices will never drop because the supply side pressure from a new energy policy remains as the driving factor.

Demand has dropped throughout 2022 as the U.S. economy, gauged in units of product sold, has contracted.  Consumers are not buying non-essential goods or services as the costs of housing, fuel, heating, electricity, overall energy and food prices continue rising.

Despite the economic contraction that is lowering energy use, rapidly increasing energy costs continue to be the driving force of inflation.

This period of depressed economic activity will continue as unemployment begins to become problematic.  As a nation we will remain in this economic malaise as long as Green New Deal, Build Back Better, energy policy is maintained.

On the positive side the economic shrinking is reversable with new energy policy; however, the opportunity to make that change is several years away.  In the interim, the cost of living will remain the biggest challenge for the foreseeable future, and the inbound open-border migration will keep wages depressed.

Under the economic program of Joe Biden wages must be depressed in order to avoid production inflation (higher labor costs) from piling atop the energy policy inflation.  Thus, the border influx will continue.

The gap between the haves and have nots is also going to explode in the next five years.