Easing in the Middle of Persistent Inflation May Worsen Stagflation Risk

Commentary Thirty major central banks are expected to cut rates in the second half of 2024, a year when more than 70 nations will have elections, which often means massive increases in government spending. In addition, the latest inflation figures show stubbornly persistent consumer price annualized growth. In the United States, headline Personal Consumption Expenditures (PCE) inflation in February will likely grow by 0.4 percent, compared with a 0.3 percent rise in January, and consensus expects a 2.5 percent annualized rate, up from 2.4 percent in January. This is on top of the already 20 percent accumulated inflation of the past four years. Core inflation will likely show a 0.3 percent gain, according to Bloomberg Economics, which means an annualized 2.8 percent, building on top of the price increases of the past years....