Pacific Investment Management Company (PIMCO) reminding us that the US CPI has 'accelerated from near zero in 2015 to 2.5% in 2018'
Blaming:
- trade tensions
- strong consumer spending
- the tight labor market
- boost in growth from tax reform and other fiscal stimulus
Then suggest 2019 might bring the possibility of an inflation surprise
- We believe inflation in the near future will be higher than in the recent past. U.S. CPI inflation has been above 2% for 12 consecutive months, and core personal consumption expenditures (PCE) is at the threshold of the Federal Reserve's target of 2%. Since inflation is a lagging economic indicator, one may reasonably expect inflation to remain elevated in the next few quarters
Which …
- could be damaging
And:
- we suggest investors consider real assets (inflation fighters) to make portfolio diversification more robust and hedge against the risk of higher inflation
As Asia kicks off to a quiet start (all the action was post-Powell, its since dissipated), here is the (ungated) article for more if you are interested.
(p.s If PIMCO are correct on higher inflation in 2019 you can forget about the Fed pausing after the December hike, K?)
