We are keeping an eye on employment costs for signs of a wage-price spiral; and on shelter costs for when the absurdly low CPI figures (3.8% YoY) begin to approximate the 19% increases we are seeing in higher-frequency reports—as leases expire or as evictions replace non-paying occupants with paying tenants at prices that would mark the first increases in two years—from Apartment.com and the like.
From the University of Chicago's ChicagoBoothReview, December 10:
Will Inflation Dwindle along with Supply Bottlenecks?
Inflation has been on the minds of consumers, policy makers, and economists for much of 2021. Consumer prices in the United States are rising at the fastest pace in three decades, and Treasury secretary Janet Yellen and Federal Reserve chair Jerome Powell have both acknowledged it’s time to stop calling the phenomenon “transitory.” Given the magnitude and persistence of price pressures, Chicago Booth’s Initiative on Global Markets invited its US panel of economic experts to express their views on the risks of prolonged higher inflation as a result of the current stance of fiscal and monetary policy, as well as the likely impact of an easing of supply bottlenecks. ...
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....On the first statement, weighted by each expert’s confidence in their response, 55 percent agreed, 34 percent were uncertain, and 11 percent disagreed. The short comments that the panelists are able to include when they participate in the survey provide a variety of perspectives on the potential effects of current supply bottlenecks on inflation over the longer term.
Among those who agreed that inflationary pressures can be expected to abate, Austan Goolsbee of Chicago Booth remarked, “The steady state for a manufactured good is not shortage.” Carl Shapiro of Berkeley said, “Temporary supply constraints cannot cause long-term inflation. People should indicate a time frame when they say ‘long term.’” Darrell Duffie of Stanford commented, “I agree because (a) the supply-chain disruptions are not permanent and (b) the Fed will eventually act.” Robert Hall at Stanford added, “That is the Fed’s job.”
Peter J. Klenow of Stanford pointed to some further reading with a consensus view on inflation prospects: “In the latest Survey of Professional Forecasters, PCE inflation is expected to average 2.3 percent from 2021-2030.” David Autor of MIT also agreed but with a caveat: “The supply bottlenecks will likely abate, but I doubt that this alone will resolve the inflation threat.” And William Nordhaus of Yale, who disagreed, explained why: “Depends upon the wage response and expectations, as well as Fed timing.”
Several participants who said that they were uncertain made reference to inflation expectations. Larry Samuelson of Yale noted, “The supply bottlenecks will abate, but expectations or other adaptations to inflation may then cause inflation to persist.” Richard Schmalensee of Yale concurred: “Bottlenecks can reasonably be expected to abate in the near term, but longer-term impacts on expectations are uncertain.” And Anil K Kashyap of Chicago Booth stated, “The inflation is here, future expectations could shift, indexing could reemerge (see John Deere union contract), no way to be certain.”....
....MUCH MORE
