Has inflation peaked or is it merely pausing for breath to explode into hyper inflation Armageddon? Why 100 points must still be on Orr’s mind

To date those wanting Reserve Bank Governors to step back from OCR overreach have been crying out inflation has stalled, but as the latest figures show, gas it peaked or is inflation pausing for breath to explode into a hyper inflationary Armageddon?

From the US…

US inflation slows to 6.4 per cent, but price pressures re-emerge

The pace of consumer price increases eased again in January compared with a year earlier, the latest sign that the high inflation that has gripped Americans for nearly two years is slowly easing.

At the same time, the consumer price report from the government showed that inflationary pressures in the US economy remain stubborn and are likely to keep prices elevated well into this year. Rising costs will also keep pressure on the Federal Reserve to raise its benchmark interest rate further and to keep it there through year’s end.

Consumer prices climbed 6.4 per cent in January from a year earlier, down from 6.5 per cent in December. It was the seventh straight year-over-year slowdown and well below a recent peak of 9.1 per cent in June. Yet it remains far above the Federal Reserve’s 2 per cent annual inflation target.

And on a monthly basis, consumer prices increased 0.5 per cent from December to January, much higher than the 0.1 per cent rise from November to December. More expensive gas, food and clothing drove up last month’s figure.

…as TDB pointed out, the biggest component of US inflation was petrol prices which Biden had been able to successfully repress by tapping the US Strategic Oil Reserves.

That’s a one trick pony he can’t play again.

In NZ we saw 10.3% food inflation prices, down from 11.3%, but underlying that drop was the caution that we had pulled all the levers to drop prices and it didn’t take into account the food inflation impact of the Auckland Flooding or Cyclone Gabrielle and with another Cyclone possible before April, that 10.3% could easily spike over the next 3 months.

Liam Dann: The rate of food price rises has dropped – a glimmer of calm in the inflation storm?

The food price data that dropped today was still ugly.

But at of 10.3 per cent, the annual rate of increase was lower than expected and down on the 11.3 per cent rise for the year to December.

…we see NZ House prices falling but stubbornly high core inflation costs now baked into the economy.

What does Orr do?

Does he pause in his 75point hikes or does he push even harder and push for 100 points.

If the market doesn’t believe Orr has the political capital to push up

This all happens as the Australian Reserve Bank pushed their OCR up 25 points with a clear warning they intend to keep the pressure up as high inflation numbers there surprised the market.

Does Orr risk allowing inflation to spike again or does he deal to it now?

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