Inflation rates is a factor of a price paid by consumers for goods. Inflation is a price and the Inflation word alone is synonymous to price. No difference. Consumer goods over the past 12 months skyrocketed to prices.
The main categories to price rises are Energy, food and dairy. The main problem is Oil prices skyrocketed and the higher oil price translated into all related categories of consumer goods. Not only does a higher oil price result in higher delivery cost for all consumer items but Oil is used in the manufacturing process for many consumer goods such as clothes and apparel.
The RBNZ factors Oil as 0.4 to their CPI index. How much for the BLS is unknown exactly but 0.4 is nor far away as all central banks factor the exact same way for all economics so not one central bank shows an advantage over another. Done by design, collusion, agreement.
While a deeply close relationship exists to the CPI Index, Inflation and Fed Funds rates, an equally close relationship exists to the M2 money supply and velocities. Analyzed from particular years in the 1970’s, 1980’s, 1990’s and all the way to 2021, the system together operates perfectly.
Inflation at 7 and 8% is an economy problem but not at all related to any monetary situation related to Money supplies, velocities, the CPI Index or Fed Funds.
Inflation’s economy problem at 8.5% is again the direct result of higher commodity prices and oil is the main dilemma. The answer to lower Inflation rates is do nothing as market prices will peak and drop and naturally drop Inflation rates over time. Powell requires a drop of 6 points to the 2% target.
But here comes Powell and the Fed to raise interest rates as interest rates is the only tool controlled by the fed in the CPI, money Supply and velocity relationship. And all for 6 Inflation points.
Since 1992, Fed Funds Vs Inflation correlates to +52%. This means raise or lower Inflation then Fed Funds must follow. The relationship is historic since 1972 and free float markets. Powell will raise interest rates to lower an Inflation rate at 52% correlation.
Shorter term, Inflation and Fed Funds rates correlates much higher to 80 and 90%.
Inflation Vs GDP Correlates +0.007. Under correct positioning, GDP rises forces Inflation lower.
Fed Funds Vs GDP correlates +37%. Raise or lower GDP then Fed Funds follows.
After Powell raises, how fast will we see lower consumer good prices. Long long time. Good chance Powell cause much more damage.
Many multiple longs and shorts are available over 24 hours.
Best trades: EUR/USD, GBP/USD, AUD/USD, GBP/JPY.
GBP/USD and AUD/USD are middle currencies and trade together.
EUR/JPY is always a perfect 24 hour trade because its relationship to daily interest rate trades is near perfect.
USD/JPY and USD/CAD contain range problems. NZD/USD isn’t worth a click.
The main target points are 1.0578 and 1.0598 then 1.0463 and 1.0469.